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Can Art Aluminum Extrusion is a privately held North American based extruder of standard and custom aluminum profiles. Assume that the Automotive Division produces and
Can Art Aluminum Extrusion is a privately held North American based extruder of standard and custom aluminum profiles. Assume that the Automotive Division produces and sells a single product. The standard costs card for the product follows: Standard Costs Per Unit Direct materials 4 metres at $3.50 per meter Direct labour 1.5 direct labour hours at $12 per hour Variable overhead 1.5 direct labour hours at $2 per hour 1.5 direct labour hours at $6 per hour Fixed overhead The following additional information is available for the year just completed: The Automotive Division manufactured 20,000 units of product during the year. A total of 78,000 metres of material was purchased during the year at a cost of $3.75 per metre. All of this material was used to manufacture the 20,000 units. There were no beginning or ending inventories for the year. The company worked 32,500 direct labour-hours during the year at a cost of $11.80 per hour. 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)
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