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 Rate Cost 6.80 pounds $ 2.90 per pounds $19.72 $ 1.80 or Direct materials Direct labor 0.20 hours $ 9.00 per hour During the most recent month, the following activity was recorded a. 15,100 pounds of material were purchased at a cost of $2.60 per pound b. All of the material purchased was used to produce 2,000 units of Zoom c. 300 hours of direct labor time were recorded at a total labor cost of $3,300 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 Direct materials quantity variance

Explanation / Answer

Direct Material (DM) Price Variance = (Standard unit price of DM - Actual unit price of DM)*Actual quantity of DM

Direct Material (DM) Price Variance = (2.9 – 2.6)*15100 = $4530

Direct Material (DM) Quantity Variance = (Standard Quantity of DM - Actual Quantity of DM)*Standard Price

Direct Material (DM) Quantity Variance = (6.8*2000 – 15100)*2.9 = -$4350

Direct Labor Rate Variance = (Standard direct labor rate – Actual direct labor rate)* actual direct labor hours

Direct Labor Rate Variance = (9 – 3300/300)*300   = -$600

Direct Labor efficiency variance = (Standard direct labor hours allowed – Actual direct labor hours used)*Standard direct labor rate per hour

Direct Labor efficiency variance = (.2*2000 – 300)*9 = $900

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