Analysis of materials and labor variances LO₃ Home Products Company manufactures a variety of products made of plastic and aluminum components. During the winter months, substantially all of the production capacity is devoted to the production of lawn sprinklers for the following spring and summer seasons. Other products are manufactured during the remainder of the year.

The company has developed standard costs for its several products.

Standard costs for each year are set in the preceding October. The standard cost of a sprinkler for the current year is $3.70, computed as follows:

Materials price variations are not determined by usage but are charged to a materials price variation account at the time the invoice is entered. All materials are carried in inventory at standard prices. Materials purchases for February were as follows:

Due to plastic shortages, the company was forced to purchase lower grade plastic than called for in the standards.This increased the number of sprinklers rejected on inspection.
Required:
Calculate price and usage variances for each type of material and for labor, using the formulas on page 286.

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Direct materials: Aluminum-0.2 lb. @ $0.40 per lb. Plastic-1.0 lb. @ $0.38 per lb. Production labor-0.3 hr. @ $8.00 per hr. Factory overhead... Total... $0.08 0.38 2.40 0.84 $3.70 During February, Home Products manufactured 8,500 good sprinklers. The company incurred the following costs, which it charged to production: Materials requisitioned for production: Aluminum-1,900 lbs. @ $0.40 per lb..... Plastic Regular grade 6,000 lbs. @ $0.38 per lb. Low grade 3,500 lbs. @$0.38 per lb..... Production labor-2,700 hrs. @ $8.60 per hr. Factory overhead..... Costs charged to production.. $ $ 760 2,280 1,330 23.220 7,140 $34,730