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 Hours or Rate Cost Direct materials Direct labor 7.80 pounds $2.30 per pound 17.94 0.30 hours $8.00 per hour 2.40 During the most recent month, the following activity was recorded a. 25,900.00 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. 2. Compute the labor rate and efficiency variances for the month. (For all requirements, 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. Round your intermediate calculations to the nearest whole dollar.) 1. Materials price variance Materials quantity variance 2. Labor rate variance Labor efficiency variance

Explanation / Answer

1) Direct material price variance :

= Actual quantity * (Standard price - Actual price)

= 25,900 * ($2.30 - $2.10)

= $5,180 Favorable

2) Direct material quantity variance :

= Standard price * (Standard quantity - Actual quantity)

= $2.30 * ((3,000*7.80) - 25,900)

= ($5,750) Unfavorable

3) Direct labour rate variance :

= Actual hours * (Standard rate - Actual rate)

= 700 * ($8 - ($6,300/700))

= ($700) Unfavorable

4) Direct labour efficiency variance :

= Standard rate * (Standard hours - Actual hours)

= $8 * ((3,000*0.3) - 700)

= $1,600 Favorable

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