Materials and Labor Variances The following information was taken from the records of Liberty Tool Manufacturing Company for its production of jack-hammers in the month of July:

Required:
1. Calculate the materials price and quantity variances, assuming that the materials price variance is recognized at the time of purchase.
2. Calculate the labor rate and labor efficiency variances.
3. Interpretive Question: What is the advantage, if any, of calculating the materials price variance at the time of purchase rather than at the time of use in production?

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Materials (actual): Purchases of wood: Purchases of steel: Used 900 pounds of wood Used 2,525 pounds of steel Direct labor (actual): Manufacturing Division: Assembly Division: Standard cost per unit: Wood: 1 pound at $2.20 per pound Steel: 3 pounds at $4.80 per pound 1,300 pounds x $2.25 2,750 pounds x $4.95 1,650 hours x $13.70 920 hours x $12.45 $ 2.20 14.40 28.00 12.25 $56.85 Direct labor-manufacturing: 2 hours at $14.00 Direct labor-assembly: 1 hour at $12.25 Standard cost per unit Units produced: 875