19,250.00 pounds of material were purchased at a cost of $2.40 per pound. All of the material purchased was used to produce 2,500 units of Zoom. 450 hours of direct labor time were recorded at a total labor cost of $4,500. Required: 1. Compute the materials price and quantity variances for the month. 2. Compute the labor rate and efficiency variances for the month.

"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 Standard Price Standard Cost

or Hours or Rate

Direct materials 6.90 pounds $ 2.60 per pounds $17.94

Direct labor 0.30 hours $ 7.00 per hour $2.10

During the most recent month, the following activity was recorded: a. "

Solution

1. Direct material price variance = Standard price - Actual price ) * Actual quantity purchased

= (2.60 - 2.40) * 19,250

= $3,850 (Favorable)

Direct material quantity variance= Standard quantity - Actual quantity * Standard Rate

= (2,500 * 6.90 - 19,250) * 2.60

= (17,250 - 19,250) * 2.60

= -2000 * 2.60

= $5,200 (Unfavorable)

2. Direct Labor rate variance = (Standard rate - Actual rate) * Actual hours

Actual rate = 4,500 / 450 = 10

Direct Labor rate variance = (7 - 10 ) * 450

= -3 * 450

= $1,350 (Unfavorable)

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

= (2,500 * 0.3 - 450) * 7

= (750 - 450 ) * 7

= 300 * 7

= $2,100 (Favorable)