(Developing standard cost card and discussion) Johnna Fox Desserts Com¬ pany produces fruit-flavored frozen desserts. Company products have typi¬ cally had strong regional sales, but recently other companies have begun marketing similar products in the area. Price competition has become in¬ creasingly important. Butch Davis, the company’s controller, is in the process of implementing a standard cost system because of its usefulness in cost control and in making better pricing decisions.

The company’s most popular product is raspberry sherbet, which is pro¬ duced in 10-gallon batches. Each batch requires 6 quarts of raspberries. The raspberries are sorted by hand before entering the production process. Be¬ cause of imperfections in the raspberries, 1 quart of berries is discarded for eveiy 4 quarts of acceptable berries. The standard direct labor sorting time to obtain 1 quart of acceptable raspberries is 3 minutes. The acceptable raspberries are then blended with other ingredients; blending requires 12 minutes of direct labor time per batch. During blending, some material is lost. After blending, the sherbet is packaged in quart containers. Davis has gathered the following cost information:

• Raspberries are purchased for $0.80 per quart.

• All other ingredients cost a total of $0.45 per gallon.

• Direct labor is paid $9.00 pef hour.

• The total cost of material and labor required to package the sherbet is $0.38 per quart.

a. Develop the standard cost for the direct cost components of a 10-gallon batch of raspberry sherbet. The standard cost should identify standard quantity, standard price/rate, and standard cost per batch for each direct cost component.

b. As part of implementing the company’s standard cost system, Davis plans to train those responsible for maintaining the standards on how to use variance analysis. He is particularly concerned with the causes of unfavorable variances.
1. Discuss the possible causes of unfavorable material price variances, and identify the individual(s) who should be held responsible for these variances.
2. Discuss the possible causes of unfavorable labor efficiency variances, and identify the individual(s) who should be held responsible for these variances.
(CMA adapted)LO.1