Question

Exercise 10-7 Direct Materials Variances (LO10-1) 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 5.20 pounds 0.40 hours Standard Price or Rate $3.00 per pound $5.00 per hour Standard Cost $15.60 $ 2.00 Direct materials Direct labor During the most recent month, the following activity was recorded: a. Ten thousand pounds of material were purchased at a cost of $2.90 per pound. b. The company produced only 1,000 units, using 8,000 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. 500 hours of direct labor time were recorded at a total labor cost of $6,000. 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 (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.) Materials price variance Materials quantity variance

Answer 1

Materials Price Variance = (SP-AP) *AQ

= (3 - 2.90)*10,000

= 1000 F

Materials Quantity Variance = (SQ-AQ) *SP

= (1000*5.20 - 8000) * 3

= 8400 U