Huron Company produces a commercial cleaning compound known as Zoom. The direct

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 Standard Price Standard Hours or Rate Cost Direct materials 7.00 pounds $ 2.20 per pounds $15.40 3.15 Direct labor 0.45 hours $ 7.00 per hour During the most recent month, the following activity was recorded: a. 19,500 pounds of material were purchased at a cost of $2.10 per pound. b. All of the material purchased was used to produce 2,500 units of Zoom, c. 1,025 hours of direct labor time were recorded at a total labor cost of $9,225. Required 1. 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 (l.e., zero variance).) Direct materials price variance Direct materials quantity variance 2. Compute the labor rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "u" for unfavorable, and "None" for no effect (l.e., zero varlance).) Direct labor rate Deect labor efficiency variance

Explanation / Answer

Answer to Question 1.

Direct Material Price Variance = (AQ * AP) – (AQ * SP)
Direct Material Price Variance = (19,500 * $2.10) – (19,500 * $2.20)
Direct Material Price Variance = $40,950 - $42,900
Direct Material Price Variance = 1,950 (Favourable)

Direct Material Quantity Variance = (AQ * SP) – (SQ * SP)
Direct Material Quantity Variance = (19,500 * $2.20) – [(2,500 * 7.00) * $2.20]
Direct Material Quantity Variance = 42,900 – (17,500 * $2.20)
Direct Material Quantity Variance = 42,900 – 38,500
Direct Material Quantity Variance = 4,400 (Unfavourable)

Answer to Question 2.

Direct Labor Rate Variance = (AH * AR) – (AH * SR)
Direct Labor Rate Variance = 9,225 – (1,025 * $7)
Direct Labor Rate Variance = 9,225 – 7,175
Direct Labor Rate Variance = 2,050 (Unfavourable)

Direct Labor Efficiency Variance = (AH * SR) – (SH* SR)
Direct Labor Efficiency Variance = (1,025 * $7) – [(2,500 * 0.45) * 7)
Direct Labor Efficiency Variance = 7,175 – (1,125 * 7)
Direct Labor Efficiency Variance = 7,175 – 7,875
Direct Labor Efficiency Variance = 700 (Favourable)

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