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, StandardPrice Cost Quantity or Standard Price Standard or Rate Direct materials Direct labor Hours 6.80 pounds $ 3.00 per pounds $20.40 0.50 hours $11.00 per hour 5.50 During the most recent month, the following activity was recorded: a. 22,900 pounds of material were purchased at a cost of $2.70 per pound. b. All of the material purchased was used to produce 3,000 units of Zoom. c. 1,400 hours of direct labor time were recorded at a total labor cost of $18,200 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 (i.e., zero variance).) Direct materials price variance 6,870 F Direct materials quantity variance

Explanation / Answer

According the information given:

Material

Standard Quantity= 6.8 pounds

Standard Rate (SR)= $3

Standard Cost(SC)= $20.4

Actual Quantity (AQ)= 22900

Actual rate(AR)=$2.7

Actual Cost(AC)= $61830 (22900*2.7)

Direct material Price=( AQXAP)- (AQXSP)

=(22900X2.7)-(22900X3)

=61830-68700= (6870) F

Direct Material Quantity variance= (SQ-AQ)XSP

Standard Quantity Allowed= Actual units producedXStandard Quantity of direct material per unit

= 3000X6.8=20400

Variance=(20400-22900) X3=-($7500) U

Labour:

Standard Hours= .5

Standard Rate(SR)=$11

Standard Cost (SC)=$5.5

Actual Hours (AH)= 1400

Actual rate(AR)=$13

Actual Cost(AC)= $18200

Direct labour Rate variane= (AHXAR)-(AHXSR)

=(1400X13)-(1400*11)

=18200-15400= $2800 U

Direct Labor Efficiency variance= (SH-AH)XSR

=(1500-1400)*11= $1100 F

SH=Standard direct labor Hours allowed= Actual unit producedXstandard direct labour hour per unit

=3000X.5=1500

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