10 marks] BwA Woodturning is a small company that operates in Northern Ontario. The company produces and sells a single product Gemwood Ice-cream Scoop. The product is made of thin strips of Baltic Birch that are dyed and glued together. The standard costs card for the product follows:

Standard Costs

Per Unit

Direct materials

0.15 square meters at $85 per square meter

Direct labour

0.85 direct labour hours at $32 per hour

Variable overhead

0.85 direct labour hours at $2.50 per hour

Fixed overhead

0.85 direct labour hours at $6.30 per hour

The following additional information is available for the fiscal 2020 just completed:

BwA Woodturning manufactured 23,875 Gemwood Ice-cream scoops during the year.

A total of 3,490 square meters of material was purchased during the year at a cost of $83.50 per square meter. All of this material was used to manufacture the 23,875 ice-cream scoops. There were no beginning or ending inventories for the year.

The company worked 20,090 direct labour-hours during the year at a cost of $34.30 per hour.

The actual variable overhead for fiscal 2020 was $55,808 and the actual fixed overhead was $127,850.

Instructions

(a) Compute the direct labour rate and efficiency variances. (4 marks)

(b) Compute the direct materials price and quantity variances. (4 marks)

(c) Prepare a brief explanation of the possible causes of the above material price and quantity variances. (2 marks)