Question
Nojar Inc. manufacturers a product that is packaged and sold in 40-kilogram bags. For 2022, the company developed the following standard costs per bag for
Nojar Inc. manufacturers a product that is packaged and sold in 40-kilogram bags. For 2022, the company developed the following standard costs per bag for direct materials and direct labour: Cost per Bag Direct materials (40 kilograms @ $6.20 per kilogram) $248.00 Direct labour (0.4 hours @ $32 per hour) 12.80 Total standard cost per 40-kg bag $260.80 For October, the company manufactured 2,500 bags. The company purchased 103,200 kilograms of materials costing $633,648 and used 101,500 kilograms. As well, the company paid $32,640 for direct labour and used 960 labour hours. Required: (A) Compute the materials price variance and materials usage variance and indicate whether each variance is favourable or unfavourable. (B) Compute the labour rate variance and labour efficiency variance and indicate whether each variance is favourable or unfavourable. (C) Provide possible reasons for each of the variances computed in (A) and (B). For example, regarding the materials price variance, why would the variance be favourable / unfavourable?
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