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 Standard Quantity or Hours 6.80 pounds 0.50 hours Standard Price or Rate $ 3.00 per pound $11.00 per hour Direct materials Direct labor $20.40 $ 5.50 During the most recent month, the following activity was recorded:
a. 22,900.00 pounds of material were purchased at a cost of $2.70 per pound.
b. All of the material purchased was used to produce 3,000 units of Zoom.
c. 1,400 hours of direct labor time were recorded at a total labor cost of $18,200.
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.)
1. Materials price variance
Materials quantity variance
2. Labor rate variance
Labor efficiency variance

Answer 1

Answer:

Huron Company

1. Materials price variance = $6,870 F

Materials quantity variance = $7,500 U

2. Labor rate variance = $($2,800) U

Labor efficiency variance = $1,100 F

Explanation:

a) Data and Calculations:

Standard Quantity  6.80 pounds

Standard Price $ 3.00 per pound

Direct materials $20.40

Standard Rate $11.00 per hour                        

Standard hours 0.50 hours

Direct labor  $ 5.50

a. Purchase of 22,900 pounds of materials at $2.70

b. Production units = 3,000

Actual quantity used 7.63 pounds (22,900/3,000)

Actual Price = $2.70

Actual material cost per unit = $20.61

c. Direct labor time = 1,400 hours at a total labor cost of $18,200

Actual rate per hour = $13 per hour ($18,200/1,400)

Actual hours = 0.47 hours

Actual direct labor cost per unit = $6.07

1. Materials price variance for the month = (Standard Price - Actual Price) * Actual Quantity of materials

= ($3 - $2.70) * 22,900

= $6,870 F

Quantity variance for the month = (Standard Qty - Actual Qty) * Standard Price

= (20,400 - 22,900) * $3

= -$7,500 U

2. Labor rate variance for the month = (Standard rate - Actual rate) * Actual labor hours

= ($11.00 - $13.00) * 1,400

= -$2,800 U

Direct labor Efficiency variance for the month = (Standard hours - Actual hours) * Standard Rate

= (1,500 - 1,400) * $11

= $1,100