Question

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

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 4.6 pounds \$ 2.50 per pound \$ 11.50 Direct labor 0.2 hours \$ 18.00 per hour \$ 2.40

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

1. Twenty thousand pounds of material were purchased at a cost of \$2.35 per pound.

2. The company produced only 3,000 units, using 14,750 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 \$14,925.

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.)

Answer- Direct Materials price variance= \$3000 F.

Direct Materials Quantity variance = \$2375 U.

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

= (\$2.50 per pound – \$2.35 per pound)*20000 pounds

= \$3000 Favorable

Direct Materials Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

=(13800 pounds –14750 pounds)*\$2.50 per pound

= \$2375 Unfavorable

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

= 4.6 pounds per unit *3000 units

= 13800 pounds