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:

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).)

     

Compute the labor rate and efficiency 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).)

Standard Quantity or Hours Standard Price   
or Rate     Standard
Cost      Direct materials 7.50 pounds $ 2.40 per pounds $ 18.00       Direct labor 0.80 hours $ 7.00 per hour $ 5.60    

Explanation / Answer

Ans-

1)Direct material price variance =(SP-AP)*AQ

                                                         =(2.4-2.2)*1500

                                                          =0.2*1500

                                                           =300(F)

Direct material quantity variance =( SQ AQ ) × SP

                                                           =(11250-13250)*2.4

                                                           =4800 (U)

      SQ=1500*7.5=11250 pound

2)Labor rate variance=( SR AR ) × AH

                                         =(7-9)*1000

                                         =-2000(U)

Labor efficiency variance =( SH AH ) × SR

                                             =(1200-1000)7

                                             =1400(F)

SH=1500*0.8=1200hrs

                                

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