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 $3.60
During the most recent month, the following activity was recorded:
a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.
b. All of the material purchased was used to produce 4,000 units of Zoom.
c. 750 hours of direct labor time were recorded at a total labor cost of $14,925.
Required:
Compute the materials price and quantity variances for the month.

AQ = Actual quantity = 20,000 pounds

AP = Actual price = $2.35 per pound.

SQ = Standard quantity = 4,000 units*4.6 pounds per unit = 18,400 pounds

SP = Standard price = $2.50 per unit

AH = Actual hours = 750 hours.

AR = Actual rate = Total actual cost/Actual hours = $14,925/750 hours = $19.90.

SH= Standard hours = 0.2 hours per unit*4,000 units = 800 hours.

SR = Standard rate = $18 per hour

Materials price variance = (AQ *AP) - (AQ *SP) =

Materials price variance = (20,000*$2.35) - (20,000 *$2.50)

Materials price variance = $47,000 - $50,000

Materials price variance = $3,000 (F)

Material quantity variance = (AQ*SP) - (SQ*SP)

Material quantity variance = (20,000*$2.50) - (18,400*$2.50)

Material quantity variance = $50,000 - $46,000

Material quantity variance = $4,000 (U)

(a) when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

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