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Cool Leather Products (CLP) produces leather clothing and accessories. The company has developed a static budget for its leather purses manufacturing department for the
Cool Leather Products (CLP) produces leather clothing and accessories. The company has developed a static budget for its leather purses manufacturing department for the first quarter. During the quarter the actual activity was 22,000 direct labour hours. Results at the end of the first quarter are shown below. Static Budget Actual Direct labour hours 20,000 22,000 Direct materials $80,000 $91,000 Direct labour 160,000 174,000 Rent 48,000 50,000 Share of fixed manufacturing overhead 12,000 11,000 Total Costs $300,000 $326,000 Required: a) Calculate relevant variances to assess cost control for the manufacturing department. b) Provide a reasonable explanation for the variances with respect to direct materials nd direct labour.
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