During the most recent month, the following activity was recorded: a. Twelve tho

Question

During the most recent month, the following activity was recorded: a. Twelve thousand pounds of material were purchased at a cost of $2.90 per pound. b. The company produced only 1,200 units, using 10,800 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. Five hundred and eighty hours of direct labor time were recorded at a total labor cost of $6,960.

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 Hours Standard Price or Rate $ 3.00 per pound $10.00 per hour Standard Direct materials Direct labor 6.2 pounds 0.4 hours Cost $18.60 $4.00 During the most recent month, the following activity was recorded: a. Twelve thousand pounds of material were purchased at a cost of $2.90 per pound. b. The company produced only 1,200 units, using 10,800 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. Five hundred and eighty hours of direct labor time were recorded at a total labor cost of $6,960. 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). Do not round intermediate calculations.) Direct materials price Variance Direct materials quantity variance

Explanation / Answer

Direct materials price variance = ( Standard price per unit - Actual price per unit ) x Actual quantity purchased = $ ( 3 - 2.90) x 12,000 = $ 1,200 F

Direct materials quantity variance = ( Standard quantity for actual output - Actual material used) x Standard price per unit = ( 6.2 x 1,200 - 10,800) x $ 3 = $ 10,080 U

$ Direct Material Price Variance 1,200 F Direct Material Quantity Variance 10,080 U

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