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12.44 * Direct materials and manufacturing labour variances, journal entries (JIT) Objectives 4,5 Nathan's Brownies is a small business that Nathan developed while at university.
12.44 * Direct materials and manufacturing labour variances, journal entries (JIT) Objectives 4,5 Nathan's Brownies is a small business that Nathan developed while at university. He began baking brownies for his friends. As demand grew, he hired some workers and began to manage the operation. Nathan's Brownies requires various ingredients and labour. He experiments with the type of ingredients that he uses, and he has great variety in the brownies he produces. Nathan has some employees who have been with him for a very long time and others who are new and inexperienced. Nathan uses standard costing for his brownies. He expects that a typical batch of brownies should take 1.5 hours to produce, and the standard wage rate is $15.50 per hour. An average batch of brownies uses 4 eggs. Nathan shops around for good deals and expects to pay $3.60 per dozen eggs, or $0.30 per egg. Nathan uses a just-in-time inventory system because he has no room to store ingredients in his apartment. For the month of April, Nathan's workers produced 230 batches of brownies using 375 hours and 79 dozen eggs. Nathan bought eggs for $304.15 (and used the entire quantity) and incurred labour costs of $6093.75. Required 1. Calculate the price and efficiency variances for the eggs, and the price and efficiency variances for direct manufacturing labour. 2. Record the journal entries for the variances incurred. 3. Discuss logical explanations for the combination of variances that Nathan experienced 4. Upon further investigation you find that production was idle for 40 hours during the month while waiting for customer orders to come in. Re-evaluate the labour efficiency based on this new information
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