3.) Refer to Requirement 2. Suppose that the industrial engineer argued that the new layout should not be evaluated after only one week. The second week had labor hours of 13,200 and labor cost of 132,000. Should the new layout be adopted? Assume the variances attribute to the new layout. If so, what would be the projected annual savings?

**** I got the first two questions but am stuck on number 3. For Labor rate variance I got 0, and for Labor efficiency variance I got 3000 favorable. I am not sure if this is correct and also not sure as to if this should now be adopted and what the savings would be?

Problem 10-69 Standard Costing, Planned Variances Phono Company manufactures a plastic toy cell phone. The following standards tablished for the toyterials and labor inputs: have been Standard Standard Standard Quantity 0.5 lb 0.15 hr Price (rate in S) $1.50 10.00 Cost $0.75 Direct materials Direct labor 1.50 During the first week of July, the company had the following results: 90,000 Units produced Actual labor costs Actual labor hours Materials purchased and used $138,000 13,400 44,250 lbs. @ $1.55 per lb. The purchasing agent located a new source of slightly higher-quality plastic, and this material was used during the first week in July. Also, a new manufacturing layout was implemented on a trial basis. The new layout required a slightly higher level of skilled labor. The higher-qualiry material has no effect on labor utilization. Similarly, the new manufacturing approach has no effect on material usage. (Note: Round all variances to the nearest dollar.) Required: 1. CONCEPTUAL CONNECTION Compute the materials price and usage variances of Assuming that the materials variances are essentially attributable to the higher quality f materials, would you recommend that the purchasing agent continue to buy this qualit, or should the usual quality be purchased? Assume that the quality of the end products not affected significantly. 2. CONCEPTUAL CONNECTION Compute the labor rate and efficiency variances Assuming that the labor variances are attributable to the new manufacturing layout, should it be continued or discontinued? Explain