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: Direct materials Direct labor Standard Quantity or Hours 7.10 pounds 0.50 hours Standard Price or Rate $ 2.50 per pound $14.50 per hour Standard Cost $17.75 $7.25 During the most recent month, the following activity was recorded: a. Thirteen thousand eight hundred pounds of material were purchased at a cost of $2.40 per pound. b. The company produced only 1,380 units, using 12,420 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. 790 hours of direct labor time were recorded at a total labor cost of $9,480. 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.)
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: Direct materials Direct labor Standard Quantity or Hours 7.10 pounds 0.50 hours Standard Price or Rate $ 2.50 per pound $14.50 per hour Standard Cost $17.75 $7.25 During the most recent month, the following activity was recorded: a. Thirteen thousand eight hundred pounds of material were purchased at a cost of $2.40 per pound. b. The company produced only 1,380 units, using 12,420 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. 790 hours of direct labor time were recorded at a total labor cost of $9,480. 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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: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:
Direct materials
Direct labor
Standard
Quantity or
Hours
7.10 pounds
0.50 hours
Materials price variance
Materials quantity variance
Standard Price.
or Rate
$ 2.50 per pound
$14.50 per hour
Standard
Cost
$17.75
$ 7.25
During the most recent month, the following activity was recorded:
a. Thirteen thousand eight hundred pounds of material were purchased at a cost of $2.40 per pound.
b. The company produced only 1,380 units, using 12,420 pounds of material. (The rest of the material purchased remained in raw
materials inventory.)
c. 790 hours of direct labor time were recorded at a total labor cost of $9,480.
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.)
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