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Minamoto, a traditional Japanese company manufacturing high quality kitchen knives, recently had a fire destroy one of their factories. The company lost substantial data but

Minamoto, a traditional Japanese company manufacturing high quality kitchen knives, recently had a fire destroy one of their factories. The company lost substantial data but was able to salvage some information. To prepare a report to their top management, the company has asked you for help.

The following are some information relating to direct labour and direct materials at the factory.

Standard direct-labour rate

$14.00

Actual direct-labour rate

$12.20

Standard direct-labour hours

12,000

Direct-labour efficiency variance - Unfavourable

$9,800

Standard unit price for direct materials

$4.50

Actual quantity of direct materials purchased and used

1,800 kg

Standard quantity allowed for actual production

1,650 kg

Direct materials price variance - Favourable

$198

Required (show all your calculations below and write in your own words):

(a) The company has asked you to calculate the following:

(i) Actual direct-labour hours worked, rounded to the nearest hour.

(ii) Price variance (or rate variance) for direct-labour.

(iii) Actual purchase price for per unit of direct materials.

(iv) Efficiency variance for direct materials.

(b) Explain fully one possible cause of the unfavourable direct-labour efficiency variance in the table above.

(c) Explain fully one possible cause of the favourable direct materials price variance in the table above?

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