Huron Company produces a commercial clearing compound known as Zoom The direct m

Question

Huron Company produces a commercial clearing 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 17.500 pounds of material were purchased at a cost of $2 20 per pound. All of the material purchased was used to produce 2.500 units of Zoom. 475 hours of direct labor time were recorded at a total labor cost of $6 175. 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).) 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

Part A

1) Materials price variance = Actual Quantity purchased (Actual price- Standard price)
= 17,500*(2.2 - 2.4) = $3,500 Favorable

2) Materials quanity variance= Standard price (Actual quantity used- Standard quantity)
= 2.4*(17,500 - 16,000)= $3,600 Unfavorable

Note: Calculation of standard quantity:

Qty of material required for 1 unit of Zoom = 6.4 pounds

Therefore, Material required for 2,500 units of Zoom = 2,500x6.4 = 16,000 pounds

Part - B

1) Direct Labour Rate Variance = Actual Hours x (Actual Rate- Standard Rate)

= $475(13-11) = $950 Unfavorable

2) Direct Labour Efficiency Variance = Standard rate x (Actual Hours- Standard Hours)

= $11(475 - 625) = $1,650 Favorable

Note: Calculation of standard hours:

Hours of labour required for 1 unit of Zoom = 0.25 Hours

Therefore, Labour Hours required for 2,500 units of Zoom = 2,500x0.25 = 625 Hours

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