Question
Markman Industries employs a standard cost system. It has established the following standards for the prime costs of its air rifle product line: Standard quantity
Markman Industries employs a standard cost system. It has established the following standards for the prime costs of its air rifle product line:
Standard quantity | Standard price | Standard cost | |
Direct materials | 4 kg | $21.80/kg | $ 87.20 |
| 0.5 direct labour hours (DLH) |
|
|
$ 91.20 |
During November, Markman purchased 13,000 kg of direct materials at a total cost of $295,100. The total factory wages for November were $38,000, 90% of which were for direct labour.
Markman manufactured 3,500 air rifles during November, using 13,500 kg of direct materials and 1,900 direct labour hours.
Required:
- What was the direct materials purchase price variance for November?
- What was the direct materials quantity variance for November?
- What was the direct labour rate variance for November?
- What was the direct labour efficiency variance for November?
- Over the past year, Markman’s management team attempted to reduce the number of customer complaints relating to the product by sourcing higher-quality direct materials from a different supplier. Explain the effect this has had on the direct material variances. Do you believe this has also impacted the direct labour variances? Explain.
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