(JIT variances) Laura Dawn uses a JIT system in her manufacturing firm, which makes pots for plants. She provides you the following standards for a typical 1 gallon pot:

In-house experiments indicated that this material change would make the pots stronger, so the company issued an engineering change order for the product. March production was 8,000 pots. Usage of raw material (all pur¬ chased at standard costs) was 184,000 ounces of Component X and 31,000 ounces of Component Y.

a. Calculate the material quantity variance.

b. Calculate the engineering change variance.

c. Summarize the company’s effectiveness in managing March production costs.

d. Comment on the circumstances in which a company would institute an engineering change that results in the expected product cost being un¬ changed.

Transcribed Image Text:

Annual Material Standards 32 ounces of component X @ $0.01 2 ounces of component Y @ $0.05 $0.32 0.10 $0.42 Current Material Standards 22 ounces of component X @ $0.01 4 ounces of component Y @ $0.05 $0.22 0.20 $0.42