Grizzly Company produces stuffed bears. For this assignment, you will use Grizzly Company's history of cost and labor, as well as actual monthly performance numbers, to compute the materials and labor variances explored in this lesson.

Directions

Complete the following calculations in an Excel file. Be sure to show and label your work for full credit.

Grizzly Company produces stuffed bears. Based on its history, it typically uses 3 pounds of material for each bear, costing $6 per pound. Each bear is expected to have direct labor of 1 hour at a rate of $10.50. In the month of January, the company produced 155,000 bears. They had direct materials of 470,000 pounds, costing on average $5.95. Direct labor was 143,000 hours at an average wage of $11.00.

1. Compute the materials price variance, materials usage variance, and the total materials variance.
2. Compute the labor rate variance, labor efficiency variance, and the total labor variance.
3. Assume the company only investigates variances if they are $7,500 or more. Should it investigate? And if so, would the answer be different if it were to look only at the total variances?