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:

Huron Company produces a commercial cleanig compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are jiven below Standard Quantity or Hours Standard Cost $15.40 $ 3.15 Standard Price or Rate Direct materials Direct labor 7.00 pounds $ 2.20 per pounds 0.45 hours $7.00 per hour During the most recent month, the following actity was recorded a. 19,500 pounds of material were purchased ta cost of $2.10 per pound b. All of the material purchased was used to pnduce 2,500 units of Zoom C. 1025 hours of direct labor time were recordd at a total labor cost of $9,225 Required: 1. Compute the materials price and quantity vaiances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "r" for unfavorable, and "None" for no effect (i.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 (i.e., zero variance).) Direct labor rate variance Direct labor efficiency variance

Explanation / Answer

1. Direct materials price and quantity variances for the month should be computed as follows:

Actual quantity = 19,500 pounds

Actual price = $2.10 per pound

Standard quantity = 2,500 units x 7 pounds = 17,500 pounds

Standard price = $2.20 per pound

Direct materials price variance = (Actual price - Standard price) x Actual quantity

= ($2.10 - $2.20) x 19,500

= $1,950 F

Direct materials quantity variance = (Actual quantity - Standard quantity) x Standard price

= (19,500 - 17,500) x $2.20

= $4,400 U

2. Labor rate and efficiency variances should be computed as follows:

Actual hours = 1,025

Standard hours = 2,500 units x 0.45 hours = 1,125 hours

Standard rate = 7.00 per hour

Actual rate = $9,225 / 1,025 hours = $9 per hour

Direct labor rate variance = (Actual rate - Standard rate) x Actual hours

= ($9 - $7 ) x 1,025

= $2,050 U

Direct labor efficiency variance = (Actual Hours - Standard Hours) x Standard rate

= (1,025 - 1,125) x $7

= $700 F

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