P$10--$Chapter $7$: Materials and Labor Variances $(2/28)$

Snowplay, Inc. manufactures and sells ski equipment. The standards for materials and labor for

manufacturing one unit of the ski equipment, called Val, are as follows:

Standard Quantity $($Hours$)$ Standard Price $($Rate$)$

Of Input of Input

Direct materials... $4$ units $ $1\mathrm{.}25$ per unit

Direct labor............ $0\mathrm{.}5$ hours $ $14\mathrm{.}00$ per hour

During the last month, the company produced $1,500$ units of Val, and used the following resources:

Direct materials: $8,000$ units were purchased at a cost of $$1\mathrm{.}20$ per unit. Of those, $1,700$ units

were in inventory at the end of the month. There was no beginning

inventory.

Direct labor: $800$ direct labor$-$hours were recorded at a cost of $$11,500.$

Required:

$1.$ Compute the material price and quantity variances for the last month.

$2.$ Compute the labor rate and efficiency variances for the last month.

$3.$ Explain what these variances mean to management.