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 Material:

Actual material purchases amounted to 81,200 kilograms at $0.375 per kilogram. Actual costs incurred in the production of 14,000 units were as follows:

Required:

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:

Explanation / Answer

Direct-material price variance = 27300-(72800*0.34)= 2548 Unfavorable Direct-material quantity variance =0.34*(72800-14000*5)= 952 Unfavorable Direct-material purchase price variance = 81200*(0.375-0.34)= 2842 Unfavorable Direct-labor rate variance =11284-(1820*6)= 364 Unfavorable Direct-labor efficiency variance =6*(1820-14000*0.12)= 840 Unfavorable

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