Exercise 11-2 Computing All Variances (LO3-CC15, 17, 18; LO4 - CC22, 23) Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labour standards for one unit of Zoom follow: Direct materials Direct labour Variable overhead Standard Quantity or Hours 4.10 kilograms 0.42 hour 0.42 hour Standard Price. or Rate: $2.20 per kilogram $8.00 per hour $1.30 per hour Standard Cost $9.02 3.36 0.55 The budgeted fixed overhead cost is $14,619 per month. The denominator activity level of the allocation base is 1,596 direct labour- hours. During the most recent month, the following activity was recorded: a. 9,100 kilograms of material were purchased at a cost of $2.22 per kilogram. b. All of the material purchased was used to produce 3,800 units of Zoom. c. A total of 790 hours of direct labour time was recorded at a total labour cost of 9,243. d. The variable overhead cost was $1,580, and the fixed overhead cost was $31,713. Required: 1. Compute the direct materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (l.e., zero variance).)
Exercise 11-2 Computing All Variances (LO3-CC15, 17, 18; LO4 - CC22, 23) Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labour standards for one unit of Zoom follow: Direct materials Direct labour Variable overhead Standard Quantity or Hours 4.10 kilograms 0.42 hour 0.42 hour Standard Price. or Rate: $2.20 per kilogram $8.00 per hour $1.30 per hour Standard Cost $9.02 3.36 0.55 The budgeted fixed overhead cost is $14,619 per month. The denominator activity level of the allocation base is 1,596 direct labour- hours. During the most recent month, the following activity was recorded: a. 9,100 kilograms of material were purchased at a cost of $2.22 per kilogram. b. All of the material purchased was used to produce 3,800 units of Zoom. c. A total of 790 hours of direct labour time was recorded at a total labour cost of 9,243. d. The variable overhead cost was $1,580, and the fixed overhead cost was $31,713. Required: 1. Compute the direct materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (l.e., zero variance).)
Chapter1: Financial Statements And Business Decisions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Exercise 11-2 Computing All Variances (LO3- CC15, 17, 18; LO4 - CC22, 23)
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labour standards for one
unit of Zoom follow:
Direct materials
Direct labour
Variable overhead
Standard Quantity
or Hours
4.10 kilograms
0.42 hour
0.42 hour
Standard Price
or Rate.
$2.20 per kilogram
$8.00 per hour
$1.30 per hour
The budgeted fixed overhead cost is $14,619 per month. The denominator activity level of the allocation base is 1,596 direct labour-
hours.
During the most recent month, the following activity was recorded:
a. 9,100 kilograms of material were purchased at a cost of $2.22 per kilogram.
b. All of the material purchased was used to produce 3,800 units of Zoom.
Standard
Cost
$9.02
3.36
8.55
Materials price variance
Materials quantity variance
c. A total of 790 hours of direct labour time was recorded at a total labour cost of 9,243.
d. The variable overhead cost was $1,580, and the fixed overhead cost was $31,713.
Required:
1. Compute the direct materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for
favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
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