Carry On, Ltd.creates hand-woven baskets in all sizes and shapes. One of its most popular items is a hexagonal basket suitable for setting out fruit or other snacks. The basket is lightweight, but strong and comes in all colours. The firm uses a standard costing system. The basket is made from high quality braided seagrass. The standard price is based on purchasing in bulk so that the highest available quantity discount is secured. The supplier pays shipping to the nearest port. From there, Carry On must provide transportation to its production facility. An environmental fee must be paid by Carry On to import the seagrass. The direct material quantity standard is based on the meters of seagrass required to make one basket, adjusted by the extra required in case a strand breaks and needs to be repaired and imperfections that are (rarely) found in the braiding. The people who weave the baskets are paid according to their level of expertise and experience. The standard rate is based on the average wage adjusted for benefits and a small degree of expected overtime. The direct labour hour standard is based on the amount of time it takes an average level weaver to make a basket, adjusted by time required to repair broken strands and work around imperfections. There is also an adjustment for the expected level of productivity. The four direct cost variances for the most recent month follow (in parentheses is the percentage of standard that the variance represents). Direct material price variance Direct material quantity variance Direct labour rate variance $13,500 U (1.2%) $26,800 U (6.8%) $45,600 F (9.8%) The people who weave the baskets are paid according to their level of expertise and experience. The standard rate is based on the average wage adjusted for benefits and a small degree of expected overtime. The direct labour hour standard is based on the amount of time it takes an average level weaver to make a basket, adjusted by time required to repair broken strands and work around imperfections. There is also an adjustment for the expected level of productivity. The four direct cost variances for the most recent month follow (in parentheses is the percentage of standard that the variance represents). Direct material price variance Direct material quantity variance Direct labour rate variance Direct labour efficiency variance $13,500 U (1.2%) $26.800 U (6.8%) $45,600 F (9.8%) $28,900 U (5.9%) Write an analysis of what might have happened during the month to cause the variances. What steps, if any, do you recommend management take to address the situation? Note there are two parts to this question. You must address both parts
