alue 5.00 points Huron Company produces a commercial cleaning compound known as

Question

alue 5.00 points 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: dard Sianor Ratends 2 Quantity or Standard Price Standard Hours Direct materials Direct labor Cost 7.80 pounds 2.30 per pounds $17.94 $2.40 0.30 hours $ 8.00 per hour During the most recent month, the following activity was recorded a. 25,900 pounds of material were purchased at a cost of $2.10 per pound b. All of the material purchased was used to produce 3,000 units of Zoom C. 700 hours of direct labor time were recorded at a total labor cost of $6.300 Required 1. 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).) Direct materials price variance Direct materials quantity variance 2. 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). Do not round your intermediate calculations.) Direct labor rate variance Direct labor efficiency variance

Explanation / Answer

1. Direct materials price variance = (standard price - actual price) × actual quantity

Therefore, direct materials price variance = (2.3 - 2.1) × 25900 = 5180 (U)

It's an unfavourable variance because actual usage is greater than standard usage estimate.

Direct materials quantity variance = (standard quantity - actual quantity) × standard price = (7.8×3000 - 25900) × 2.3 = 5750 (U)

It's an unfavourable variance because actual quantity used is more than the standard quantity expected to be used.

2. Direct Labour rate variance = (standard rate - actual rate) × actual hours = (8 - 6300/700) × 700 = 700 (U)

It's an unfavourable variance because actual rate is higher than standard rate.

Direct Labour efficiency variance = (actual hours - standard hours) × standard rate = (700 - 900) × 8 = 1600 (F)

It's a favourable variance because actual hours used / applied is lesser than the standard hours estimate.

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