Question
Cabouy Company manufactures a product with the following standard costs: Direct materials 40 metres @ $2.70 per metre $108 Direct labour 8 hours @ $18.00
Cabouy Company manufactures a product with the following standard costs:
Direct materials 40 metres @ $2.70 per metre $108
Direct labour 8 hours @ $18.00 per hour $144
Total standard prime cost per unit of output $252
The following information pertains to the month of July 2020:
Direct material purchased 41,000 metres @ $2.76 per metre = $115,920
Direct material used 35,000 metres
Direct labour 7,200 hours @ $18.30 per hour = $131,760
Actual July 2020 production was 1,150 units.
Required
Calculate the following variances for the month of July, indicating whether each variance is favourable or unfavourable:
1.Direct material price variance.(2 Marks)
2.Direct material quantity variance.(2 Marks)
3.Direct labour rate variance.(2 Marks)
4.Direct labour efficiency variance.(2 Marks)
5.Discuss the possible causes of material price and efficiency variances. Identify the individuals responsible for these variances.
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