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 6.00 pounds $ 2.30 per pounds $ 13.80
Direct labor 0.50 hours $ 10.00 per hour $ 5.00
During the most recent month, the following activity was recorded:

During the most recent month, the following activity was recorded:
a. 11,000 pounds of material were purchased at a cost of $2.10 per pound.
b. All of the material purchased was used to produce 1,500 units of Zoom.
c. 500 hours of direct labor time were recorded at a total labor cost of $6,500.


Required:
1.
Compute the materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

2. Compute the labor rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer 1

1. $2,200 Favorable ; $4,600 Unfavorable

2. $1,500 Unfavorable ; $2,500 Favorable

Step-by-step explanation:

1. Material price variance:

= Actual quantity × Standard cost per unit-Actual cost

= (11,000 × $2.30) - ($2.10 × 11,000 )

= $2,200 Favorable

Material quantity variance:

= (Standard quantity × Standard cost per unit) - (Actual quantity × Standard cost per unit )

= (1,500 × 6 × $2.30) - (11,000 × $2.30)

= $4,600 Unfavorable

2. Labor rate variance:

= (Actual hours × Standard rate) - Actual labor paid

= (500 × $10) - $6,500

= $1,500 Unfavorable

Labor efficiency variance:

= (Standard hours × Standard rate) - (Actual hours × Standard rate )

= (1,500 × 0.50 × $10) - (500 × $10)

= $2,500 Favorable