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, 0.22 hour Rate, $11.00 per hour Quantity, 3 kilograms Price, s0.54 per kilogram Actual material purchases amounted to 156,400 kilograms at $0.610 per kilogram. Actual costs incurred in the production of 34,000 units were as follows: Direct labor: Direct material: $93,024 for 8,160 hours $70,516 for 115,600 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 "O" 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

Explanation / Answer

Direct material price variance = 115600*(0.61-0.54)= 8092 Unfavorable Direct material quantity variance = 0.54*(115600-34000*3)= 7344 Unfavorable Direct material purchase price variance = 156400*(0.61-0.54)= 10948 Unfavorable Direct labor rate variance =93024-(8160*11)= 3264 Unfavorable Direct labor efficiency variance = 11*(8160-34000*0.22)= 7480 Unfavorable

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