(1) Describe two methods of setting standards (Hilton, p. 479, 9-3)

2) (a) During June, Spencer Companys material purchases amounted to 6,000 pounds at a price of $7.30 per pound. Actual costs incurred in the production of 2,000 units were as follows:

Direct Labour: $116,745 ($18.10 per hour)

Direct Materials: $ 30,660 ($ 7.30 per pound)

The standards for one unit of Spencer Companys product are as follows:

Direct Labour Direct Material

Quantity, 3 hours per unit Quantity, 2 pounds per unit

Rate, $18 per hour Price, $7 per pound

REQUIRED:

Compute the direct-material price and quantity variances and the direct-labour rate and efficiency variances. Indicate whether each variance is

favourable or unfavourable. (Hilton, p. 479, 9-26)

(b) Refer to the data in the preceding exercise. Draw diagrams depicting the direct-material and direct-labour variances similar to the diagrams in Figures 6.1 and 6.2