Cost and production data for Binghamton Beverages Inc. are present as follows:

Standard Cost Summary

Mixing Blending Total

Materials:

--4 lbs @ $ .50 $ 2

--1 gal @ $ 1.00 $ 1 $ 3

Labor:

--1 hr @ $ 8.00 8

--1 hr @ $ 10.00 10 18

Factory Overhead:

--Per unit 1 2 3

Totals $ 11 $ 13 $ 24

Production Report

Mixing Blending

Beginning units in process None None

Units finished and transferred 6,000 5,000

Ending units in process (50% complete) 2 ,000 1,000

Actual Cost Data

Mixing Blending

Direct Material:

30,000 lbs @ $ .52 $ 15,600

5,500 gals @ $ .95 $ 5,225

Direct Labor:

6,800 hrs @ $ 8.00 54,400

5,500 hrs @ $ 10.20 57,120

Factory Overhead:

Indirect materials $ 500 $ 1,000

Indirect labor 2,000 5,000

Other 4,500 5,000

Total Cost $ 77,000 $ 73,345

Required:

1) Calculate price and quantity variances for materials, rate and efficiency variances for labor and factory overhead variance for both departments .

2) Comment on the possible causes for each of the variances that you computed.

3) Determine the balance of ending Work In Process in each department.

4) Assume that 4,000 units were sold at $ 40 each.

a) Calculate the gross margin based on standard cost.

b) Calculate the gross margin based on actual cost.

c) Explain why there is a difference.