Question

uron 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 7.20 pounds $ 2.90 per pound $ 20.88 Direct labor 0.50 hours $ 10.00 per hour $ 5.00 During the most recent month, the following activity was recorded: 16,900.00 pounds of material were purchased at a cost of $2.60 per pound. All of the material purchased was used to produce 2,000 units of Zoom. 800 hours of direct labor time were recorded at a total labor cost of $8,800. 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:

Instructions are listed below.

Explanation:

Giving the following information:

Standard Costs and units:

Standard material per unit= 7.20 pounds

Standard cost per pound= $2.90

Standard direct hours= 0.50 hours

Standard cost per hour= $10

Actual cost and units:

16,900.00 pounds of material were purchased at a cost of $2.60 per pound.

Units produced= 2,000 units.

800 hours of direct labor time were recorded at a total labor cost of $8,800.

1) 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= (2.9 - 2.6)*16,900= $5,070 favorable

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

Direct material quantity variance= (7.2*2,000 - 16,900)*2.9= $7,250 unfavorable

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

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

Direct labor efficiency variance= (2,000*0.5 - 800)*10= $2,000 favorable

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

Direct labor rate variance= (10 - 11)*800= $800 unfavorable