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 7.80 pounds $ 2.30 per pounds $ 17.94 Direct labor 0.30 hours $ 8.00 per hour $ 2.40 During the most recent month, the following activity was recorded:

a. 25,900 pounds of material were purchased at a cost of $2.10 per pound.
b. All of the material purchased was used to produce 3,000 units of Zoom.
c. 700 hours of direct labor time were recorded at a total labor cost of $6,300.
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

To calculate the materials price and quantity variances and labor rate and efficiency variances, we use formulas based on standard prices and quantities. The materials price variance was found to be -$5,180 (favorable), the materials quantity variance $5,750 (unfavorable), the labor rate variance $700 (unfavorable), and the labor efficiency variance -$1,600 (favorable).

Step-by-step explanation:

Materials and Labor Variances

We need to calculate the materials price variance and the materials quantity variance. The materials price variance is found by taking the difference between the actual price and the standard price, and multiplying it by the actual quantity purchased. The formula is (Actual Price - Standard Price) × Actual Quantity. For the materials quantity variance, the formula is (Actual Quantity - Standard Quantity) × Standard Price. Since 25,900 pounds of material were purchased at a cost of $2.10 per pound and the standard is $2.30 per pound for 7.80 pounds per unit, the materials price and quantity variances can be calculated as follows:

Materials Price Variance: (2.10 - 2.30) × 25,900 = -$5,180 (Favorable)
Materials Quantity Variance: (25,900 - (3,000 units × 7.80 pounds per unit)) × 2.30 = (25,900 - 23,400) × 2.30 = $5,750 (Unfavorable)

Next, we'll calculate the labor rate variance and the labor efficiency variance. The labor rate variance is the difference between the actual hourly rate and the standard hourly rate multiplied by the actual hours worked. The labor efficiency variance is the difference between the actual hours worked and the standard hours allowed, multiplied by the standard rate. Since 700 hours of direct labor time were recorded at a total labor cost of $6,300, the standard rate is $8.00 per hour, and the standard hours for 3,000 units would be 3,000 units × 0.30 hours per unit, these variances can be computed as:

Labor Rate Variance: (($6,300 / 700 hours) - $8.00) × 700 hours = ($9.00 - $8.00) × 700 = $700 (Unfavorable)
Labor Efficiency Variance: (700 hours - (3,000 units × 0.30 hours per unit)) × $8.00 = (700 - 900) × $8.00 = -$1,600 (Favorable)

Answer 2

Instructions are below.

Step-by-step explanation:

Giving the following information:

Standard Cost Direct materials 7.80 pounds $ 2.30 per pounds $7.94

Direct labor 0.30 hours $ 8.00 per hour $ 2.40

Actual:

a. 25,900 pounds of material was purchased at a cost of $2.10 per pound.

b. All of the material purchased was used to produce 3,000 units of Zoom.

c. 700 hours of direct labor time were recorded at a total labor cost of $6,300.

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= (2.3 - 2.1)*25,900

Direct material price variance= $5,180 favorable

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

Direct material quantity variance= (7.8*3,000 - 25,900)*2.3

Direct material quantity variance= $5,750 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= (0.3*3,000 - 700)*8

Direct labor time (efficiency) variance= $1,600 favorable

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

Direct labor rate variance= (8 - 6,300/700)*700

Direct labor rate variance= $700 unfavorable