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 Standard Quantity or Price or Hours Rate 6.90 0.50 pounds hours Standard Cost $2.50 $13.50 per $ pound 17.25 per hour During the most recent month, the following activity was recorded: $ 6.75 Thirteen thousand four hundred pounds of material were purchased at a cost of $2.40 per pound. The company produced only 1,340 units, using 12,060 pounds of material. (The rest of the material purchased remained in raw materials inventory.) 770 hours of direct labor time were recorded at a total labor cost of $9.240.
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 Standard Quantity or Price or Hours Rate 6.90 0.50 pounds hours Standard Cost $2.50 $13.50 per $ pound 17.25 per hour During the most recent month, the following activity was recorded: $ 6.75 Thirteen thousand four hundred pounds of material were purchased at a cost of $2.40 per pound. The company produced only 1,340 units, using 12,060 pounds of material. (The rest of the material purchased remained in raw materials inventory.) 770 hours of direct labor time were recorded at a total labor cost of $9.240.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 Standard
Quantity or
Price or
Hours
Rate
pounds
6.90
0.50
hours
Standard
Cost
$2.50
$13.50
per $
pound 17.25
per $
hour 6.75
During the most recent month, the following activity was
recorded:
Thirteen thousand four hundred pounds of material were
purchased at a cost of $2.40 per pound.
The company produced only 1,340 units, using 12,060 pounds
of material. (The rest of the material purchased remained in raw
materials inventory.)
770 hours of direct labor time were recorded at a total labor
cost of $9,240.
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.)
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