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 Standerd Quantity or Standard Price Standard o Rate Cost 620 88 S 5.00 Hours Direct materials Direct labor 7-20 Oounde 2-90 Per 050 houre10.00 per During the most recent month, the following activity wes recorded a. 16,900.00 pounds of material were purchased at a cost or $2 60 per pound. b. All of the material purchased was used to produce 2,00o units of Zoom. c. 800 hours of direct labor time were recorded at a total labor cost of $8,800. 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 ffect (I.e., zero variance). Input all amounts as positive values. Round your intermediate calculations to the nearest whole dolar)

Explanation / Answer

Materials price variance = Actual quantity * (Actual price - Standard price)

= 16,900 * (2.6 - 2.9)

= 5,070 Favourable

Materials quantity variance = Standard price * (Actual quantity - Standard quantity)

= 2.9 * [16,900 - (2,000*7.2)]

= 2.9 * (16,900 - 14,400)

= 7,250 Unfavourable

Labour rate variance = Actual hours * (Actual rate - Standard rate)

= 800 * [(8,800/800) - 10]

= 800 * (11 - 10)

= 800 Unfavourable

Labour efficiency variance = Standard rate * (Actual hours - Standard hours)

= 10 * [800 - (2,000*0.5)]

= 10 * (800 - 1,000)

= 2,000 Favourable

Materials price variance 5,070 Favourable Materials quantity variance 7,250 Unfavourable Labour rate variance 800 Unfavourable Labour efficiency variance 2,000 Favourable

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