Huron Company produces a commercial cleaning compound known as Zoom. The direct

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:

Twelve thousand six hundred pounds of material were purchased at a cost of $2.40 per pound.

The company produced only 1,260 units, using 11,340 pounds of material. (The rest of the material purchased remained in raw materials inventory.)

730 hours of direct labor time were recorded at a total labor cost of $8,760.

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. Do not round intermediate calculations.)

Standard Quantity or Hours Standard Price
or Rate Standard
Cost Direct materials 6.50 pounds $ 2.50 per pound $ 16.25 Direct labor 0.50 hours $ 11.50 per hour $ 5.75

Explanation / Answer

Solution:

Standard quantity of material for actual production = 1260 * 6.50 = 8190 pound

Actual quantity of material purchased = 12600 pound

Actual quantity of material use = 11340 pound

Standard price of material = $2.50

Acutal price of material = $2.40

Material price variance = (SP - AP) * AQ Purhcased = ($2.50 - $2.40) * 12600 = $1,260 F

Material quantity variance = (SQ - AQ) * SP = (8190 - 11340) * $2.50 = $7,875 U

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