Question

EXERCISE 10-6 Direct Materials and Direct Labor Variances L010-1, L010-2 and direct labor standards for one unit of Zoom are given below: mat shown in Exhibit 10-6.) Huron Company produces a commercial cleaning compound known as Zoom. The direct materials Standard Quantity Standard Price or Hours or Rate Standard Cost Direct materials Direct labor. 4.6 pounds 0.2 hours $2.50 per pound $18.00 per hour $11.50 $3.60 During the most recent month, the following activity was recorded: a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound. b. All of the material purchased was used to produce 4,000 units of Zoom. c. 750 hours of direct labor time were recorded at a total labor cost of $14,925. Required: 1. Compute the materials price and quantity variances for the month. 2. Compute the labor rate and efficiency variances for the month.

Answer 1

Answer :-

Actual DATA for	4,000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	20,000	$    2.35	$ 47,000
Direct labor	750	$ 19.90	$ 14,925

Standard DATA for	4,000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 4.6 pounds x 4,000units)=18,400 pounds	$ 2.50	$ 46,000
Direct labor	( 0.2 hours x 4,000 units)=800 hours	$ 18.00	$ 14,400

Requirement 1

Material Price Variance
	Standard Rate	-	Actual Rate	x	Actual Quantity
	$ 2.50	-	$ 2.35	x	20,000
	3,000
	Variance		3,000.00		Favourable-F

Material Quantity Variance
	Standard Quantity	-	Actual Quantity	x	Standard Rate
	18,400	-	20,000	x	2.50
	-4,000
	Variance		$ (4,000.00)		Unfavourable - U

Requirement 2

Labor Rate Variance
	Standard Rate	-	Actual Rate	x	Actual Labor Hours
	$ 18.00	-	$ 19.90	x	750
	-1425
	Variance		$ (1425.00)		Unfavourable - U

Labor Effieciency Variance
	Standard Hours	-	Actual Hours	x	Standard Rate
	800	-	750	x	18.00
	900
	Variance		$ 900.00		Favourable-F