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: a. 16,900 pounds of material were purchased at a cost of $2.60 per pound. b. All of the material purchased was used to produce 2,000 units of Zoom. c. 800 hours of direct labor time were recorded at a total labor cost of $8,800. Required: 1. Compute the materials price and quantity variances for the month.

Explanation / Answer

1. Direct Material Price Variance = Actual quantity (Actual Price - Standard Price)

= 16900 (2.60 - 2.90) = 5070 (Favorable)

Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) * Standard Price

= ((2000*7.20) - 16900) * $2.90 = 7250 (Unfavorable)

2. Direct Labour Rate Variance = (Actual Rate - Standard Rate) * Actual Hours

= (8800/800 - 10) * 800 = 800 (Unfavorable)

Direct Labour Efficiency Variance = (Actual Hours - Standard Hours) * Standard Rate

= (800 - (2000*.50)) * 10 = 2000 (Favorable)

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