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	7.00	pounds	$	3.00	per pound	$	21.00
Direct labor	0.40	hours	$	14.00	per hour	$	5.60

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

1. Thirteen thousand six hundred pounds of material were purchased at a cost of $2.90 per pound.

2. The company produced only 1,360 units, using 12,240 pounds of material. (The rest of the material purchased remained in raw materials inventory.)

3. 644 hours of direct labor time were recorded at a total labor cost of $7,728.

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.)

Answer 1

Solution

Material Price Variance	$           1,360.00	Favourable-F
Material quantity variance	$ 8,160.00	Unfavourable-U

Alternate solution for material price variance

Material Price Variance

$ 1,224.00

Favourable-F

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    3.00	-	$                     2.90	)	x	12240
	1224
	Variance		$             1,224.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	9520	-	12240	)	x	$              3.00
	-8160
	Variance		$             8,160.00			Unfavourable-U

.

Standard DATA for		1360	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 7 pounds x 1360 Units)=9520 pounds	$                   3.00	$            28,560.00

.

Actual DATA for		1360	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	12240	$       2.90	$          35,496.00