Problem 10-11 Basic Variance Analysis [LO1, LO2, LO3] Please explain how you arrived at your answers as this is very helpful. Thank you Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has established the following standards for one unit of Fruta: | | Standard Quantity | Standard Price or Rate | Standard Cost | Direct materials | 1.3 pounds | $ | 5.80 | per pound | $ | 7.54 | Direct labor | 0.8 hours | $ | 12.10 | per hour | | 9.68 | Variable manufacturing overhead | 0.8 hours | $ | 2.70 | per hour | | 2.16 | | | | | | | | | | | | | $ | 19.38 | | | | | | | | | During June, the company recorded this activity related to production of Fruta: | a. | The company produced 4,200 units during June. | b. | A total of 10,180 pounds of material were purchased at a cost of $57,008. | c. | There was no beginning inventory of materials; however, at the end of the month, 2,200 pounds of material remained in ending inventory. | d. | The company employs 10 persons to work on the production of Fruta. During June, they worked an average of 296 hours at an average rate of $12.50 per hour. | e. | Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable manufacturing overhead costs during June totaled $7,400. | The company's management is anxious to determine the efficiency of Fruta production activities. | a. | Compute the price and quantity variances. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.) | | | | Materials price variance | $ | | Materials quantity variance | $ | | | b. | The materials were purchased from a new supplier who is anxious to enter into a long term purchase contract. Would you recommend that the company sign the contract? | | | | | 2. | For labor employed in the production of Fruta: | a. | Compute the rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.) | | | | Labor rate variance | $ | | Labor efficiency variance | $ | | | b. | In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? | | | | | 3a. | Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.) | | | | Variable overhead rate variance | $ | | Variable overhead efficiency variance | $ | | | |