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Part 3: Cost Variance Analysis Duck Company produces a single product. The company has set the following standards for direct materials and direct labor: Inputs
Part 3: Cost Variance Analysis Duck Company produces a single product. The company has set the following standards for direct materials and direct labor: Inputs Standard price or rate Standard quantity or hours per product unit 5 pounds per unit ? hours per unit Direct materials Direct labor $2.5 per pound $? per hour During the past month, the company purchased 7,000 pounds of direct materials at a cost of $17,500, and this material was used in the production to make 1,300 units of product. 3,500 direct labor hours were used in making the 1,300 units of product, and total direct labor cost was $36,750 for the month. The labor efficiency variance is $1,000F and total labor cost/spending variance is $750U. 2. For direct labor: (a). Please provide a hypothetical explanation for the labor efficiency variance that would be consistent with the $1,000 F. Please specify which department you believe is responsible for that variance. (5 points) (b). Compute the labor rate variance and identify whether it is For U. Provide a hypothetical explanation for the labor rate variance and specify which department you believe is responsible for that variance. (10 points) (c). Compute the standard labor rate per hour for the month. (10 points) (d). Compute the standard labor hours allowed per unit of product. (5 points)
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