1, Huron Company produces a commercial cleaning compound known as Zoom. The dire
ID: 2527255 • Letter: 1
Question
1, 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:
During the most recent month, the following activity was recorded:
Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.
All of the material purchased was used to produce 4,000 units of Zoom.
750 hours of direct labor time were recorded at a total labor cost of $14,925.
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 effect (i.e., zero variance). Input all amounts as positive values.)
2, 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:
During the most recent month, the following activity was recorded:
Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.
The company produced only 3,000 units, using 14,750 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
750 hours of direct labor time were recorded at a total labor cost of $14,925.
Required:
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). Input all amounts as positive values.)
3,
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:
During the most recent month, the following activity was recorded:
Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.
The company produced only 3,000 units, using 14,750 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
750 hours of direct labor time were recorded at a total labor cost of $14,925.
Required:
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). Input all amounts as positive values.)
4, Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:
Direct materials: 6 microns per toy at $1.50 per micron
Direct labor: 1.3 hours per toy at $21 per hour
During July, the company produced 3,000 Maze toys. The toy's production data for the month are as follows:
Direct materials: 25,000 microns were purchased at a cost of $1.48 per micron. 5,000 of these microns were still in inventory at the end of the month.
Direct labor: 4,000 direct labor-hours were worked at a cost of $88,000.
Required:
1. Compute the following variances for July: (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
a. The materials price and quantity variances.
b. The labor rate and efficiency variances.
Standard Quantity or Hours Standard Priceor Rate Standard
Cost Direct materials 4.6 pounds $ 2.50 per pound $ 11.50 Direct labor 0.2 hours $ 18.00 per hour $ 3.60
Explanation / Answer
Problem 1
Solution
Part 1)
Material Price Variance
Material Price Variance is the variance arises in the material cost due to difference in actual material purchase price from standard material price. Mathematically, it is calculated as below:
Material Price Variance = Actual Quantity (Standard Price – Actual Price)
Note --- Here actual quantity means actual quantity of material PURCHASED. If the question does not provide the information about material purchase, it is taken as equal to material consumed.
Direct Material Price Variance
Actual Price
$2.35
per pound
Standard Price
$2.50
per pound
Variance or Difference in Price
$0.15
per pound
x Actual Quantity PURCHASED
20000
Pounds
Material Price Variance
$3,000
Favorable
Material Quantity/Efficiency/Usage Variance
Material Efficiency (Usage) Variance measures variance in material cost due to usage/consumption of materials. It is calculated as below:
Material Quantity Variance = Standard Price (Standard Quantity for Actual Production – Actual Quantity USED)
Note --- Here actual quantity means actual quantity of material CONSUMED/USED
Direct Material Quantity Variance
Standard Quantity Allowed for actual production:
Actual Production/Activity
4000
Units
x Allowed Standard Quantity Per Unit
4.6
Pounds
Total Standard Quantity Allowed for actual production (SQAP)
18400
Pounds
Actual Quantity USED (AQU)
20000
Pounds
Variance or Difference in Quantity
1600
Pounds
x Standard Price (SP)
$2.50
Per Pound
Material Quantity Variance
$4,000
Unfavorable
Part 2
Labor Rate Variance
Labor Price Variance – It arises due to difference in actual rate paid from standard rate. It is calculated as below:
Labor Price Variance = Actual Time (Standard Rate per hour – Actual Rate per hour)
Here, actual time means time for which wage has been paid.
Labor Rate Variance
Actual Hourly Rate (AHR) ($14,925 / 750)
$19.90
Per Hour
Standard Hourly Rate (SHR)
$18.00
Per Hour
Variance or Difference in Rate
$1.90
Per Hour
x Actual Labor Hours worked
750
Hours
Labor Rate Variance
$1,425
Unfavorable
Labor Quantity Variance
Labor Efficiency Variance – It arises due to variation in the working hours from the set standard.
Labor Quantity / Efficiency Variance
Standard Hours Allowed for actual production:
Actual Production
4000
Units
x Allowed Standard Hours Per Unit
0.2
hours
Total Standard Hours Allowed for actual production (SHAP)
800
hours
Actual Labor Hours Worked (AH)
750
hours
Variance or Difference in Hours
50
hours
x Standard Hourly Rate (SHR)
$18.00
per hour
Labor Efficiency Variance
$900
Favorable
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Pls ask separate question for remaining parts.
Direct Material Price Variance
Actual Price
$2.35
per pound
Standard Price
$2.50
per pound
Variance or Difference in Price
$0.15
per pound
x Actual Quantity PURCHASED
20000
Pounds
Material Price Variance
$3,000
Favorable
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