IV. The Betty Crocker Company produces a form of baking soda, Pizzaz, which has

Question

IV. The Betty Crocker Company produces a form of baking soda, Pizzaz, which has a strong following among industrial bakeries. The direct materials and direct labor standards for one box of this ingredient are given below: Standard Cost $5.50 $7.00 Standard Price or Rate Standard Quantity or Hours $1.25 pounds $12 per hour ....2.3 pounds 0.5 hours During the most recent month, the following activity was recorded a. Ten thousand pounds of materials were purchased at a cost of $1.35 a pound b. All of the material purchased was used to produce 2,000 units of Pizzaz. c. 800 hours of direct labor time were recorded at a total labor cost of $10,000. Required: 1. Compute the materials price variance and quantity variances for the month. 2 Compute the labor rate and efficiency variances for the month.

Explanation / Answer

1 Materials price variance = 10000*(1.35-1.25)= 1000 Unfavorable Materials quantity variance = 1.25*(10000-2000*2.3)= 6750 Unfavorable 2 Labor rate variance = 10000-(800*12)= 400 Unfavorable Labor efficiency variance =12*(800-2000*0.5)= 2400 Favorable

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