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 6.90 pounds $2.60 per pounds $17.94 0.30 hours $7.00 per hour 2.10 Hours Direct materials Direct labor During the most recent month, the following activity was recorded: a. 19,250 pounds of material were purchased at a cost of $2.40 per pound. b. All of the material purchased was used to produce 2,500 units of Zoom. c. 450 hours of direct labor time were recorded at a total labor cost of $4,500. 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 Price variance

= (Actual price - Standard price) x Actual quantity purchased

= ($2.40 per pound - $2.60 per pound) x 19250 pound

= $3850 Favourable

Standard usage for actual production

= 2500 unit x 6.90 pounds per unit

= 17250 pound

Direct material quantity variance

= (actual quantity used - standard quantity) x Standard price

= (19250 - 17250) pounds x $2.60 per pound

= $5200 Unfavourable

2)

Labour Rate variance

= (Actual rate - Standard rate) x actual hours used

= ($4500/450 hours - $7/hour) x 450 hours

= ($10/hour - $7 / hour) x 45 hours

= $1350 Unfavourable

Standard hours allowed fopr actual production

= 2500 unis x 0.30 hours per unit

= 750 hours

Labour Efficiency variance

= (actual hours used - standard hours allowed) x Standard rate

= (450 hours - 750 hours) x $7/hour

= $2100 Favourable

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