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 7.90 pounds $2.10 per pound $16.59
Direct labor 0.50 hours $5.00 per hour $2.50

During the most recent month, the following activity was recorded:

a. 14,850.00 pounds of material were purchased at a cost of $2.00 per pound.
b. All of the material purchased was used to produce 1,500 units of Zoom.
c. 600 hours of direct labor time were recorded at a total labor cost of $4,200.

Required:
1. Compute the materials price and quantity variances for the month.
2. Compute the labor rate and efficiency variances for the month.

Answer 1

Answer:

Results are below.

Explanation:

To calculate the direct 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= (2.1 - 2)*14,850

Direct material price variance= $1,485 favorable

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

Direct material quantity variance= (7.9*1,500 - 14,850)*2.1

Direct material quantity variance= $6,300 unfavorable

To calculate the direct labor 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= (1,500*0.5 - 600)*5

Direct labor time (efficiency) variance= $750 favorable

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

Direct labor rate variance= (5 - 7)*600

Direct labor rate variance=  $1,200 unfavorable

Actual rate= 4,200/600= $7