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

The materials price variance for the month is -$630 and the materials quantity variance is $3,770. The labor rate variance for the month is -$10,500 and the labor efficiency variance is $550.

Step-by-step explanation:

To compute the materials price variance, subtract the actual cost from the cost that was expected. The standard cost for the materials is $20.40 (6.80 pounds x $3.00 per pound), so the expected cost for 3,000 units is $61,200 ($20.40 x 3,000). The actual cost of the materials purchased is $61,830 (22,900 pounds x $2.70 per pound). Therefore, the materials price variance is -$630 ($61,200 - $61,830).

To compute the materials quantity variance, subtract the actual quantity used from the quantity that was expected. The standard quantity for the materials is 6.80 pounds per unit, so the expected quantity for 3,000 units is 20,400 pounds (6.80 pounds x 3,000). The actual quantity used is 22,900 pounds. Therefore, the materials quantity variance is $3,770 (22,900 pounds - 20,400 pounds) x $3.00 per pound.

To compute the labor rate variance, subtract the actual labor cost from the cost that was expected. The standard cost for labor is $5.50 (0.50 hours x $11.00 per hour), so the expected cost for 1,400 hours is $7,700 ($5.50 x 1,400). The actual labor cost recorded is $18,200. Therefore, the labor rate variance is -$10,500 ($7,700 - $18,200).

To compute the labor efficiency variance, subtract the actual hours used from the hours that were expected. The standard hours for labor is 0.50 hours per unit, so the expected hours for 3,000 units is 1,500 hours (0.50 hours x 3,000). The actual hours recorded is 1,400 hours. Therefore, the labor efficiency variance is $550 (1,500 hours - 1,400 hours) x $11.00 per hour.