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 6.80 pounds $ 3.00 per pound $ 20.40 Direct labor 0.50 hours $ 11.00 per hour $ 5.50 During the most recent month, the following activity was recorded: 22,900.00 pounds of material were purchased at a cost of $2.70 per pound. All of the material purchased was used to produce 3,000 units of Zoom. 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.

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Standard:

Direct materials 6.80 pounds $ 3.00 per pound $ 20.40

Direct labor 0.50 hours $ 11.00 per hour $ 5.50

Actual:

22,900 pounds of material were purchased for $2.70 per pound. 1,400 hours of direct labor time were recorded at a total labor cost of $18,200.

Production= 3,000 units

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= (3 - 2.7)*22,900

Direct material price variance= $6,870 favorable

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

Direct material quantity variance= (6.8*3,000 - 22,900)*3

Direct material quantity variance= $7,500 unfavorable

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

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

Direct labor time (efficiency) variance= (0.5*3,000 - 1,400)*11

Direct labor time (efficiency) variance= $1,100 favorable

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

Actual rate= 18,200/1,400= $13

Direct labor rate variance= (11 - 13)*1,400

Direct labor rate variance= $2,800 unfavorable