Plastics Inc. developed standard costs for direct material and direct labor. In 2022 John Fraser, CFO, estimated the following standard costs for one of their major products, a 10-gallon plastic container.

Standard quantity Standard price

Direct materials 3.25 pounds $8 per pound

Direct labor 0.50 hour $18 per hour

During August, Plastics produced and sold 8,000 containers. The company purchased and used 27,500 pounds of direct materials at an average cost per pound of $7.75 and worked 4,150 direct labor hours at an average wage of $17.85 per hour. During August, Plastics changed suppliers. Production manager, Susan French indicated there was more wastage of material and increased labour cost due to cheaper materials purchased from the new supplier. More hours were also worked to correct defects. Due to increased production and direct labour hours, less skilled individuals were hired to complement regular staff. John is concerned costs for a container has changed and would like to arrange an analysis of the reason for any increase or decrease.

1. Determine the standard cost to manufacture a container.
2. Determine the actual cost of manufacturing a container.
3. Determine the material price and material usage variances.
4. Determine the labour rate and labour efficiency variances.
5. Explain the variances to John indicating why the variances may have occurred.