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		Standard Price or Rate			Standard Cost
Direct materials	6.40	pounds	$	1.70	per pound	$	10.88
Direct labor	0.40	hours	$	14.00	per hour	$	5.60

During the most recent month, the following activity was recorded:

1. 18,500.00 pounds of material were purchased at a cost of $1.40 per pound.

2. All of the material purchased was used to produce 2,500 units of Zoom.

3. 800 hours of direct labor time were recorded at a total labor cost of $13,600.

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

Direct Material price Variance = (SP – AP ) * AQ => AQⓇSP – AQⓇAP Standard price =$1.7 Actual price = $1.4 Actual Quantity is 18500 Direct Material price Variance =($1.7 -$1.4)x18500 Direct Material price variance=$5550 favourable Material Quantity Variance = ( Standard Usage in Units - Actual Usage in Units )x Standard Cost per unit Actual output is 2500 units Standard Cost per is $1.7 Standard Usage per unit of output is 6.4 So Standard Usage for Actual Output is 2500 Units x6.4 per unit of output =16000 Actual Usage is 18500 Material Quantity variance =(16000 – 18500)x$1.7 Direct Material Quantity Variance = $4250 Unfavourable Direct labor price variance = (SR - AR) x AH Standard Rate is $14 per hour Actual Rate =$13600/800 Hours =>$17 Actual Hours is 800 Hours Direct Labor Price Variance =($14-$17)* 800 Direct labor price variance =2400 Unfavourable Direct labor quantity variance = SRX (SH - AH) Standard Rate is $17 per hour Standard Hour in Actual output = 2500 Units x Standard Hours per unit 0.40 Hours Standard Hours in Actual Output = 1000 Hours Actual Hours 800 hours Direct Labor Quantity Variance = $17 *(1000-800) Direct Labor Quantity Variance =$3400 favourable

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