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 Standard Price Standard or Rate Cost $15.25 $ 4.75 Hours Direct materials Direct labor 6.10 pounds $2.50 per pound 0.50 hours $9.50 per hour During the most recent month, the following activity was recorded a. Eleven thousand eight hundred pounds of material were purchased at a cost of $2.40 per pound b. The company produced only 1,180 units, using 10,620 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. 690 hours of direct labor time were recorded at a total labor cost of $8,280 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.) Answer is complete but not entirely correct Materials price variance $1,180 Materials quantity variance 720 U

Explanation / Answer

Material quantity variance = (actual units used - standard units) × standard rate

Therefore, material quantity variance = (10620 - 6.1×1180) × 2.5 = 8555

It's an unfavourable variance because actual usage of materials here has been more than the standard usage estimate.

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