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 Cost $16.43 $ 4.22 Hours or Rate Direct materials Direct labor 7.30 pounds $2.25 per pound 0.65 hours 6.50 per hour During the most recent month, the following activity was recorded: a. 16,600.00 pounds of material were purchased at a cost of $2.05 per pound b. All of the material purchased was used to produce 2,000 units of Zoom c. 1,200 hours of direct labor time were recorded at a total labor cost of $11,400.

Explanation / Answer

1) Material Price Variance $    3,320 F Material Quantity Variance $    4,500 U Working: Material Price Variance = (Standard Price - Actual Price)*Actual Quantity of materials used = (2.25-2.05)*16600 = $         3,320 F Material Quantity Variance = (Standard Quantity-Actual Quantity)*Standard Price = (14600-16600)*2.25 = $         4,500 U Standard Quantity = Actual Production x Standard quantity per unit = 2000 x 7.3 =           14,600 2) Labor rate variance $    3,600 U Labor efficiency Variance $        650 F Working: Labor rate variance = (Standard rate - Actual Rate )*Actual Labor hours = (6.50-9.50)*1200 = $         3,600 U Actual Labor rate = Actual Labor cost/actual labor hours = $      11,400 / 1200 = $           9.50 Labor efficiency Variance = (Standard Labor hours-Actual Labor hours)*Standar Labor rate = (1300-1200)*6.5 = $            650 F Standard Labor hours = Actual productions x Standard Labor hours per unit = 2000 x 0.65 = 1300

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