Huron Company produces a commercial cleaning compound known as Zoom. The direct
ID: 2548551 • Letter: H
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:
During the most recent month, the following activity was recorded:
25,900.00 pounds of material were purchased at a cost of $2.10 per pound.
All of the material purchased was used to produce 3,000 units of Zoom.
700 hours of direct labor time were recorded at a total labor cost of $6,300.
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. Round your intermediate calculations to the nearest whole dollar.)
Standard Quantity or Hours Standard Priceor Rate Standard
Cost Direct materials 7.80 pounds $ 2.30 per pound $ 17.94 Direct labor 0.30 hours $ 8.00 per hour $ 2.40
Explanation / Answer
1) Materials Price Variance = (Std Price - Actual Price)*Actual Qty
= ($2.30 - $2.10)*25,900 pounds
= $0.20*25,900 pounds = $5,180 Favorable
Materials Quantity Variance = (Std Qty for Actual Production - Actual Qty)*Std Price
Std Qty for Actual Production = 3,000 units*7.80 pounds per unit = 23,400 pounds
Materials Qty Variance = (23,400 pounds - 25,900 pounds)*$2.30
= ($5,750) Unfavorable
2) Actual Labor Rate = Actual Labor Cost/Actual Labor Hours
= $6,300/700 hrs = $9 per hour
Std hours allowed for Actual Production = 3,000 units*0.30 hours = 900 hours
Labor rate Variance = (Std rate - Actual rate)*Actual Hours
= ($8 - $9)*700 hours = ($700) Unfavorable
Labor Efficiency Variance = (Std Hours - Actual Hours)*Std rate
= (900 hrs - 700 hrs)*$8 = $1,600 Favorable
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