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:

Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.

All of the material purchased was used to produce 4,000 units of Zoom.

750 hours of direct labor time were recorded at a total labor cost of $14,925.

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.)

Standard Quantity or Hours Standard Price
or Rate Standard
Cost Direct materials 4.6 pounds $ 2.50 per pound $ 11.50 Direct labor 0.2 hours $ 18.00 per hour $ 3.60

Explanation / Answer

Answer to 1 and 2

Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity Purchased                                                              = ( 2.50 - 2.35) x 20000                                                              = 3000 Fav Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Rate                                                              = ( 4.6 x 4000 - 20000) x 2.35                                                              = 3760 Unfav Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours                                                        = [18 - 19.90] x 750                                                              = 1442.10 Unfav Actual labor Price Per hour = Total Cost / total hours                                                                  = 14925 / 750                                                                  = 19.90 per hour Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate                                                              = [4000 x 0.2 - 750] x 18                                                              = 900 Fav

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