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 7.50 pounds $ 2.40 per pound $ 18.00
Direct labor 0.80 hours $ 7.00 per hour $ 5.60

During the most recent month, the following activity was recorded:
13,250.00 pounds of material were purchased at a cost of $2.20 per pound.
All of the material purchased was used to produce 1,500 units of Zoom.
1,000 hours of direct labor time were recorded at a total labor cost of $9,000.

Compute the materials price and quantity variances for the month.
Compute the labor rate and efficiency variances for the month.

Answer 1

Answer:

DM variances:

Price 2650

Quantity -4,800

Labor Variances:

Rate:-2,000

Efficiency 1400

Explanation:

DM variances:

Price

(std - actual) x actual quantity

(2.4 - 2.2) x 13,250 = 2,650

Quantity

(standard quantity - actual quantity) x std price

(7.5x1,500 - 13,250) x 2.4 = -4,800

Labor Variances:

Rate:

(std rate - actual rate) x actual hours

(7 - 9) x 1,000 = -2,000

actual rate = actual cost/actual hours = 9,000/1,000 = 9

Efficiency

(std hours - actual hours) x std rate

(1,500 x 0.8 - 1,000) x 7 = 1400