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 Hours Standard Price or Rate Standard Cost Direct materials 6.40 pounds $ 1.70 per pound $ 10.88 Direct labor 0.40 hours $ 14.00 per hour $ 5.60 During the most recent month, the following activity was recorded: 18,500.00 pounds of material were purchased at a cost of $1.40 per pound. All of the material purchased was used to produce 2,500 units of Zoom. 800 hours of direct labor time were recorded at a total labor cost of $13,600. 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.)

Answer 1

Answer:  Materials price  variance= $5,550 ----F - Favourable

              Materials quantity  variance=$4,250-U- Unfavourable

              Labor Rate Variance= $2,400- U=Unfavorable

           Labor Efficiency Variance=$2,800 =F Favourable

Explanation:

               Standard Quantity   Standard Price         Standard Cost            

                           or Hours                   or Rate

Direct materials 6.40 pounds    $ 1.70 per pound          $ 10.88

D.irect labor         0.40 hours       $ 14.00 per hour        $ 5.60

18,500.00 pounds of material were purchased at a cost of $1.40 per pound. All of the material purchased was used to produce 2,500 units of Zoom. 800 hours of direct labor time were recorded at a total labor cost of $13,600

a  Materials price  variance =Actual Quantity of Material Purchased*(Actual Rate - Standard Rate)

=18,500 X ( 1.40 -1.70)= 18,500 X 0.3= $5,550 ----F - Favourable because  the actual cost of material per unit is less than the standard cost of material per unit]

b  Materials quantity  variance=Standard Rate*(Actual Quantity of Material Used in Production - Standard Quantity of Material Used in Production)

Standard Quantity of Material Used in Production = Actual Units Produced*Standard Material Per Unit

=2500 x  6.40= 16,000pounds nof materials

Materials quantity  variance=1.70 x (18,500 - 16,000) =$4,250-U- Unfavourable because the actual quantity of material used to produce 2,500 units is higher than what was expected as the standard

C)Labor Rate Variance = Actual Hours Used*(Actual Rate - Standard Rate)

Actual rate = Actual cost/ Actual time

= 13,600/800= $17

Labor Rate Variance= 800 x (17-14)= 800 x 3 = $2,400- U=Unfavorable because the actual labor hour rate is higher than the  standard hour  rate

D)Labor Efficiency Variance = Standard Rate*(Actual Hours Used in Production - Standard Hours Used in Production)

Standard Hours Used in Production = Actual Units Produced*Standard Hours Per Unit

2500 x 0.40=1000 hours

Labor Efficiency Variance= 14 x ( 800 -1000) 14 x 200= $2,800 =F Favourable because the actual hours used in production is less than the standard hours that could have been used to produce 2,500 units