Assignment
1. 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:
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Standard Quantity or Hours
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Standard Price
or Rate
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Standard Cost
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Direct materials
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6.7 pounds
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$ 2.50 per pound
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$ 16.75
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Direct labor
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0.5 hours
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$ 12.50 per hour
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$ 6.25
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During the most recent month, the following activity was recorded:
a. Thirteen thousand pounds of material were purchased at a cost of $2.40 per pound.
b. The company produced only 1,300 units, using 11,700 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
c. Seven hundred and fifty hours of direct labor time were recorded at a total labor cost of $9,000.
Required:
Compute the materials price and quantity variances for the month.
2. SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company's products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals using 750 direct labor-hours. The company paid these direct labor workers a total of $6,000 for this work, or $8.00 per hour.
According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $7.00 per hour.
Required:
a. According to the standards, what direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost?
b. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance.
3. Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:
Direct materials: 7 microns per toy at $0.32 per micron
Direct labor: 1.1 hours per toy at $7.20 per hour
During July, the company produced 4,700 Maze toys. Production data for the month on the toy follow:
Direct materials: 73,000 microns were purchased at a cost of $0.30 per micron. 31,875 of these microns were still in inventory at the end of the month.
Direct labor: 5,670 direct labor-hours were worked at a cost of $43,659.
Required:
A. Compute the following variances for July:
a. The materials price and quantity variances.
b. The labor rate and efficiency variances.
4. Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours.
In the most recent month, 175,000 items were shipped to customers using 7,400 direct labor-hours. The company incurred a total of $24,790 in variable overhead costs.
According to the company's standards, 0.04 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.40 per direct labor-hour.
Required:
a. According to the standards, what variable overhead cost should have been incurred to fill the orders for the 175,000 items? How much does this differ from the actual variable overhead cost?
b. Break down the difference computed in (1) above into a variable overhead rate variance and a variable overhead efficiency variance.
5. A materials price variance is unfavorable if the actual price exceeds the standard price.
True
False