Question

Exercise 10-6 Direct Materials and Direct Labor Variances (LO10-1, LO10-2] 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 7.90 pounds 0.50 hours Standard Price or Rate $2.10 per pound $5.00 per hour Standard Cost $16.59 $ 2.50 Direct materials Direct labor During the most recent month, the following activity was recorded: a. 14,850.00 pounds of material were purchased at a cost of $2.00 per pound. b. All of the material purchased was used to produce 1,500 units of Zoom. C. 600 hours of direct labor time were recorded at a total labor cost of $4,200. Required: 1. Compute the materials price and quantity variances for the month. 2. Compute the labor rate and efficiency variances for the month. (For all requirements, Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your intermediate calculations to the nearest whole dollar.)

Answer 1

	Material Price Variance = Acutual Qty * ( Std Price - Actual Price )
			= 14850 Pounds ( $2.10 per pound - $2 per Pound)
			=$1485 (F)
	Material Qty Variance = Std Price * (Std Qty - Actual Qty)
		=$2.10 * ([7.90 pounds*1500 units)-14850 pounds)
		=$6300 (U)
	Labor Rate Variance = Actual Labor Hours * (Std Rate - Actual Rate )
		= 600 hours * ($50 - [$4200/600])
		=600* (5-7)
		=$1200 (U)
	Labor Efficiency Variance = Std Rate * (Std Hours - Actual Hours)
		=$5 per hour * ([1500 units* 0.5 per unit] - 600 hours)
		=$5 * (750 -600)
		=$750(F)