Materials and labor variances analyses LO₃ Whoosh, Inc. manufactures a fuel additive, Surge, that has a stable selling price of $44 per drum. The company has been producing and selling 80,000 drums per month.

In connection with your examination of Whoosh's financial statements for the year ended September 30, management has asked you to review some computations made by Whoosh's cost accountant. Your working papers disclose the following about the company's operations:
Standard costs per drum of product manufactured:

Costs and expenses during September:
Surge: 600,000 gallons purchased at a cost of $ 1 , 1 40,000; 645,000 gallons used.
Empty drums: 94,000 purchased at a cost of $94,000; 80,000 used.
Direct labor: 8 1 ,000 hours worked at a cost of $654,480.
Factory overhead: $768,000.
Required:
Calculate the following variances for September, using the formulas on page 286:
1.Materials quantity variance.
2. Materials price variance (determined at time of purchase).
3. Labor efficiency variance.
4. Labor rate variance.

Transcribed Image Text:

Materials: 8 gallons of Surge @ $2..... $16 I empty drum.. $17 Direct labor-1 hour $8 Factory overhead... $6