Variance analysis Asahi USA, Inc. is a Denver, Colorado, based subsidiary LO 1 of a Japanese company manufacturing specialty tools. Asahi USA employs a standard cost system. Presented below are standards per unit of one of its products, tool KJ79. This tool requires as direct materials a special chrome steel.

During November, Asahi USA started and completed job KJX86 to manu¬ facture 1900 units of tool KJ79. It purchased and used 14,250 pounds of the special chrome steel for tool KJ79 at a total cost of $270,750. The total direct labor charged to Job KJX86 was $37,800. Job KJX86 required 5000 direct labor hours.

(a) For job KJX86, compute the following and indicate whether the variances are favorable or unfavorable:
(i) direct material price variance.
(ii) direct material use variance.
(iii) direct labor rate variance.
(iv) direct labor efficiency variance.

(b) Provide a plausible explanation for the variances.(LO 1)

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Direct materials Direct labor STANDARD QUANTITY 8 pounds 2.5 hours STANDARD PRICE STANDARD COST $18 per pound $8 per hour $144 20 $164