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: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 7.20 pounds $ 2.00 per pounds $ 14.40 Direct labor 0.35 hours $ 5.00 per hour $ 1.75 During the most recent month, the following activity was recorded: a. 21,000 pounds of material were purchased at a cost of $1.70 per pound. b. All of the material purchased was used to produce 2,500 units of Zoom. c. 725 hours of direct labor time were recorded at a total labor cost of $5,438. 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).)

Explanation / Answer

Compute the Labor rate variance.

Actual rate per hour = $5438/725 =

Labor rate variance = Actual hours (Actual rate - Standard rate)

= 725 hours (7.5-5) = 725 * 2.5 = $1812.5 Unfavorable(U).

Compute the labor efficiency variance.

Labor efficiency variance = Standard rate(Actual hours - Standard hours)

Standard hours = 2500units * 0.35 = 875 hours.

Labor efficiency variance = $5 * (725-875) = $750 Favorable(F)

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

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