Question

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below. Standard Quantity or Hours 6.70 pounds 0.50 hours Standard Price or Rate $2.50 per pound $12.50 per hour Standard Cost $16.75 $ 6.25 Direct materials Direct labor During the most recent month, the following activity was recorded: a. Thirteen thousand pounds of material were purchased at a cost of $2.40 per pound. b. The company produced only 1,300 units, using 11,700 pounds of material. (The rest of the material purchased remained in raw materials inventory) c. 750 hours of direct labor time were recorded at a total labor cost of $9.000. Required: Compute the materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (1.e., zero variance). Input all amounts as positive values. Do not found intermediate calculations.) Materials price variance Materials quantity variance

Answer 1

Solution

Material Price Variance	$           1,300.00	Favourable-F
Material quantity variance	$           7,475.00	Unfavourable-U

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    2.50	-	$                     2.40	)	x	13000
	1300
	Variance		$             1,300.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	8710	-	11700	)	x	$              2.50
	-7475
	Variance		$             7,475.00			Unfavourable-U

.

Standard DATA for		1300	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 6.7 Pounds x 1300 Units)=8710 Pounds	$              2.50	$            21,775.00

..

		1300	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	13000	$            2.40	$                               31,200.00