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 Standard Price Standard
or Hours or Rate Cost
Direct materials 4.6 pounds $2.50 per pound $ 11.50
Direct labor 0.2 hours $18.00 per hour $ 3.60
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.)
1. Materials price variance
Materials quantity variance
2. Labor rate variance
Labor efficiency variance

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Standard:

Direct materials 4.6 pounds $2.50 per pound $ 11.50

Direct labor 0.2 hours $18.00 per hour $ 3.60

Actual:

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.

1) To calculate the material price and quantity variance, we need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (2.5 - 2.35)*20,000

Direct material price variance= $3,000 favorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

standard quantity= 4,000*4.6= 18,400 pounds

Direct material quantity variance= (18,400 - 20,000)*2.5

Direct material quantity variance= $4,000 unfavorable

2) To calculate the direct labor time(efficiency) and rate variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (0.2*4,000 - 750)*18

Direct labor time (efficiency) variance= $900 favorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= (14,925/750)= $19.9

Direct labor rate variance= (18 - 19.9)*750

Direct labor rate variance= $1,425 unfavorable