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	6.70	pounds	$	2.50	per pound	$	16.75
Direct labor	0.50	hours	$	12.50	per hour	$	6.25

During the most recent month, the following activity was recorded:

1. Thirteen thousand pounds of material were purchased at a cost of $2.40 per pound.

2. The company produced only 1,300 units, using 11,700 pounds of material. (The rest of the material purchased remained in raw materials inventory.)

3. 750 hours of direct labor time were recorded at a total labor cost of $9,000.

Required:

Compute the materials price and quantity variances for the month. (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. Do not round intermediate calculations.)

Answer 1

Answer- Materials price variance= $1300 F.

Materials Quantity variance = $7475 U.

Explanation- Materials price variance = (Standard price – Actual price) * Actual quantity used

= ($2.50 per pound – $2.40 per pound)*13000 pounds

= $1300 Favorable

Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

=(8710 pounds –11700 pounds)*$2.50 per pound

= $7475 Unfavorable

Where:-

Standard Quantity = No. of pounds per unit*Actual output

= 6.70 pounds per unit *1300 units

= 8710 pounds