Problem #10: Standard Costing & Variances

Jakes Cheese Company produces gourmet cheese for resale at local grocery stores. Jakes expected to use 0.50 direct labor hours to produce one unit (batch) of product at a cost of $10 per hour. Actual results are in for last year, which indicates 45,000 batches of cheese were sold. The company's direct labor workforce worked 27,500 hours at $9 per hour.

Required:

(1) Calculate the labor rate variance.

(2) Calculate the labor efficiency variance.

(3) Suggest several possible reasons for the labor rate and efficiency variances.