Epsilon Manufacturing

Scenario: Evaluate Standard Costs

Data:

• Standard Costs:
  • Direct Materials: $5 per unit
  • Direct Labor: $8 per unit
  • Variable Overhead: $3 per unit

• Actual Costs:
  • Direct Materials: $6 per unit
  • Direct Labor: $7 per unit
  • Variable Overhead: $2 per unit

Requirements:

1. Calculate the direct materials price and quantity variances.
2. Calculate the direct labor rate and efficiency variances.
3. Calculate the variable overhead spending and efficiency variances.
4. Discuss the causes of the variances and their implications for Epsilon Manufacturing.
5. Recommend actions to improve cost control based on the variance analysis.