Question
Normally, it costs $100,450 to make 7,000 units, with each unit requiring 3.5 pounds of direct materials. The current invoice was for 60,000 pounds of
Normally, it costs $100,450 to make 7,000 units, with each unit requiring 3.5 pounds of direct materials.
The current invoice was for 60,000 pounds of direct material at a total of $234,000 for the month.
18,750 pounds were used in production this month.
It normally takes 7 hours to complete on unit. This month's direct labor budget was $490,000.
Time cards showed a total of 36,000 hours spent to make 5,000 units. Total direct labor was $396,000.
Calculate the following and indicate a U or F for unfavorable or favorable
1. Direct Materials Price Variance
2. Direct Materials Efficiency Variance
3. Direct Labor Rate Variance
4. Direct Labor Efficiency Variance
Provide a reasonable story as to what occurred during the month and the consequences that resulted.
Would you encourage the employees to make the same choices in the future? Why or why not?
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