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vivado [14]
3 years ago
14

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one uni

t of Zoom are given below: 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 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.)
Business
1 answer:
Bond [772]3 years ago
6 0

Answer:

1. Material Variances

Material Price Variance = $3,000 F

Material Quantity Variance = $4,000 U

2. Labor Variances

Labor Rate Variance = $1,425 U

Labor Efficiency Variance = $900 F

Explanation:

Provided information we have,

Direct Materials

Standard Quantity = 4.6 pounds

Standard Rate = $2.50 per pound

Direct Labor

Standard Hours = 0.2 hour per unit

Standard Rate = $18 per hour

Actual Materials

Actual Quantity = 20,000 pounds

Actual Rate = $2.35 per pound

Actual Labor

Labor Hours = 750 hours

Labor Cost = $14,925

Labor rate = \frac{14,925}{750} = $19.9 per hour

Actual Units produced = 4,000

1. Material Variances

Material\ Price\ Variance = (Standard\ Price - Actual\ Price) \times Actual\ Units

= ($2.50 - $2.35) \times 20,000 pounds

= $3,000

As the actual rate is less than standard rate the variance is favorable.

Material\:Quantity\ Variance = (Standard\ Quantity - Actual\ Quantity) \times Standard\ Rate

Standard Quantity = 4,000 \times 4.6 = 18,400 pounds

Material Quantity Variance = (18,400 - 20,000) \times $2.50

= - $4,000

As the actual raw material quantity used is higher than standard raw material quantity the variance is unfavorable.

2. Labor Variances

Labor\ Rate\ Variance = (Standard\ Rate - Actual\ Rate) \times Actual\ Hours

= ($18 - $19.9) \times 750 = - $1,425

As actual rate is higher than standard rate thus the variance is unfavorable.

Labor\ Efficiency\ Variance = (Standard\ Hours - Actual\ Hours) \times Standard\ Rate

Standard Hours = 4,000 \times 0.2 = 800

Labor Efficiency Variance = (800 - 750) \times $18

= $900

As the Standard Hours is more than Actual Hours the variance is favorable.

1. Material Variances

Material Price Variance = $3,000 F

Material Quantity Variance = $4,000 U

2. Labor Variances

Labor Rate Variance = $1,425 U

Labor Efficiency Variance = $900 F

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