Hazelnuts are used in high-end chocolate items such as pralines and truffles. In addition, hazelnuts are used in Nutella spread. Turkey supplies more than 70% of the worlds hazelnuts. In 2014, there was a widespread frost in Turkey that damaged hazelnut flowers and cut production of hazelnuts by 28%. The price of hazelnuts more than doubled ahead of the peak demand season at Christmas and the Lunar New Year and the price continue to be high into 2015.

NUTELLA is made by Ferrero Canada Inc., which is headquartered in Toronto, Ontario, Canada. Ferrero Canada Inc., is a subsidiary of Ferrero International. The main production plant for Nutella for North America is in Brantford, Ontario.

Variences Explanations: https://www.accountingcoach.com/standard-costing/explanation/6

Questions

What variance(s) will the increased cost of hazelnuts impact at the Nutella plant in Ontario?

How can Nutella respond to the increase in the cost of hazelnuts?