6. Cartman makes Supersized Cheezy-Poofs. Cartman determined the standards for e

Question

6. Cartman makes Supersized Cheezy-Poofs. Cartman determined the standards for each unit (bag) of Cheezy-Poof produced requires 1.5 gallons of ingredients (direct materials) and 0.75 direct labor hours. Cartman expects to pay S2 per gallon of ingredients and his employees a rate of $10 per hour. Based on the company's forecasts, Cartman is expecting to sell 15,000 units (bags) during the year. At the end of year, Cartman actually sold 16,000 units (bags) and used 20,000 gallons of ingredients and paid S1.9 per gallon. Further, Human resources informed Cartman that he incurred $80,000 in direct labor costs from 10,000 direct labor hours (assume no overtime is used). a. What is the material price variance? b. What is the material quantity variance? c.What is the labor rate variance? d. What is the labor usage variance?

Explanation / Answer

a) Material price variance = (2-1.90)*20000 = 2000 F

b) Material usage variance = (16000*1.5-20000)*2 = 8000 F

c) Labour rate variance = (10*10000-80000) = 20000 F

d) Labour efficiency variance = (16000*.75-10000)*10 = 20000 F

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