Question

# Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards...

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:

1. 16,900.00 pounds of material were purchased at a cost of \$2.60 per pound.

2. All of the material purchased was used to produce 2,000 units of Zoom.

3. 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.

(For all requirements, Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your intermediate calculations to the nearest whole dollar.)

1. Compute the materials price and quantity variances for the month.

Material Price Variance = (AP – SP) * AQ

(\$2.60 - \$2.90) * 16900 pound = \$5070 F

Material Quantity Variance = (AQ – SQ) * SP

SQ = Actual output * SQ per unit

= 2000 units * 7.20 = 14400 pounds

(16900 – 14400) * \$2.90 = \$7250 U

2. Compute the labor rate and efficiency variances for the month.

Labor Rate Variance = (AR – SR) * A Hrs
AR = \$8800/800 hours = \$11

(\$11 - \$10) * 800 hours = \$800 U

Labor Efficiency Variance = (A Hrs – S Hrs) * SR

S Hrs = Actual output * S Hrs per unit

= 2000 * 0.50 hour = 1000 hours

(800 – 1000) * \$10 = \$2000 F

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