4 5 1 Berry Company manufactures a product called Frescha. The company uses a standard cost system and 2 has established the following standards for one unit of Frescha: 3 Standard Standard Price Standard 5 Quantity or Rate Cost 6 Direct materials 1.5 pounds $6.00 per pound $9.00 7 Direct labor 0.6 hours $12.00 per hour $7.20 8 Variable manufacturing overhead 0.6 hours $2.50 per hour $1.50 9 $17.70 10 During June, the company recorded this activity relative to production of Frescha: 12 a. The company produced 3,000 units during June. 13 b. A total of 8,000 pounds of material were purchased at a cost of $46,000. 14 C. There was no beginning inventory of materials on hand to start the month; at the end of the 15 month, 2,000 pounds of material remained in the warehouse unused. 16 d. The company employs 10 persons to work on the productionof Frescha. During June, each worked an average of 160 hours at an average rate of $12.50 per hour. 18 e. Variable manufacturing overhead is assigned to Frescha on the basis of direct labor hours. Variable manufacturing overhead costs during June totaled $3,600. 11 17 19 20 21 The company's management is anxious to determine the efficiency of the activities surrounding 22 the production of Frescha. 25 24 Required: 25 1. For materials used in the production of Frescha: 26 a. Compute the price and quantity variances. 27 b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract? Explain. 29 2. For labor employed in the production of Frescha, compute the rate and efficiency variances. 30 3. Compute the variable overhead spending and efficiency variances. 28