Hurton Company produces a commercial cleanin compound known as Zoom. The direct

Question

Hurton Company produces a commercial cleanin compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:

Standard Quantity Standard Price Standard
or Hours or Rate Cost

Direct Materials…………. 4.6 pounds $2.50 per pound $11.50
Direct Labor…………….. 0.2 hours $12.00 per hour $ 2.40

During the most recent month, the following activity was recorded:
a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.
b. All of the material purchased was used to produce 4,000 units of Zoom.
c. 750 hours of direct labor time were recorded at a total labor cost of $10,425.

Required:
1. Compute the direct material price and quantity variances for the month.
2. Compute the direct labor rate and efficiency variances for the month.

Explanation / Answer

Direct materials price variance (MPV) formula: [Materials Price Variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price)] ie MPV= (20000*$2.35) - (20000*$2.50) = $(3,000.00) = $3000F.....Ans(a) Materials quantity variance (MQV) Formula: [Materials quantity variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard Price)] ie MQV = (20000*2.50) - ((4000*4.6)*2.50) = $4,000U .....Ans (b) Direct Labor Rate Variance (DLRV) Formula: [Labor rate variance = (Actual hours worked × Actual rate) - (Actual hours worked × Standard rate)] ie DLRV = (750*(10425/750)) - (750*12) = $1425U.......Ans (c) Formula of labor efficiency variance (LEV) : [Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours allowed × Standard rate)] ie LEV = (750*12) - ((4000*0.2)*12) = -600 = 600F .....Ans (d)

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.