Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of produc

Question

Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct Labor: Direct Material: Quantity, 0.28 hour Rate, $14.00 per hour Quantity, 7 kilograms Price, $0.66 per kilogram Actual material purchases amounted to 340,400 kilograms at $0.690 per kilogram. Actual costs incurred in the production of 46,000 units were as follows Direct labor: Direct material: $197,340 for 13,800 hours $225, 354 for 326,600 kilograms Required 1. Use the variance formulas to compute the direct-material price and quantity variances, the direct-material purchase price variance and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting "Favorable" or "unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance.) Direct-material price variance Direct-material quantity variance Direct-material purchase price variance Direct-labor rate variance Direct-labor efficiency variance nfavorable nfavorable nfavorable Unfavorable nfavorable

Explanation / Answer

Direct material price variance=225354-(326600*0.66)= $9798 Unfavorable Direct material quantity variance=0.66*(326600-46000*7)= $3036 Unfavorable Direct material purchase price variance=340400*(0.69-0.66)= $10212 Unfavorable Direct labor rate variance=197340-(13800*14)= $4140 Unfavorable Direct labor efficiency variance=14*(13800-46000*0.28)= $12880 Unfavorable

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