Huron Company produces a commercial cleaning compound known as Zoom. The direct
ID: 2558075 • 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:
19,250.00 pounds of material were purchased at a cost of $1.70 per pound.
All of the material purchased was used to produce 2,500 units of Zoom.
400 hours of direct labor time were recorded at a total labor cost of $5,200.
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 7.10 pounds $ 1.80 per pound $ 12.78 Direct labor 0.20 hours $ 12.00 per hour $ 2.40
Explanation / Answer
1.
Materials price variance = Actual quantity purchased * (Actual price - Standard price)
= 19,250 * (1.7 - 1.8)
= 1,925 Favourable
Materials quantity variance = Standard price * (Actual quantity used - Standard quantity)
= 1.8 * [19,250 - (2,500*7.1)]
= 1.8 * (19,250 - 17,750)
= 2,700 Unfavourable
2.
Labour rate variance = Actual hours * (Actual rate - Standard rate)
= 400 * [(5,200/400) - 12]
= 400 * (13 - 12)
= 400 Unfavourable
Labour efficiency variance = Standard rate * (Actual hours - Standard hours)
= 12 * [400 - (2,500*0.2)]
= 12 * (400 - 500)
= 1,200 Favourable
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