Problem 3 The Copper Bottom Pot Company Ltd., (CBPC), manufactures only one product, called The Big Pot. The company uses a standard cost system and has established the following standards per unit of The Big Pot. Standard Quantity Standard Price Standard Cost Direct materials 6.0 kilograms $14 per kilogram $84 Direct labour 1.5 hours $20 per hour $30 The following activities were recorded by CBPC for the production of The Big Pot in January 2000. The company produced 600 units during the month. A total of 4,000 kilograms of material were purchased at a cost of $52,000. On January 1, 2000, there was no beginning inventory of materials on hand; 200 kilograms of materials remained in the warehouse unused at the end of the month. The company employs 12 persons to produce The Big Pot. In January, each worked an average of 65 hours at an average of $21 per hour. Required - a. For direct materials used 1n the production of The Big Pot: i. Compute the direct materials purchase price variance and the direct materials usage variance. ii. The direct 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? Explain. b. For the direct labour employed 1n the production of The Big Pot: i. Compute the direct labour rate variance and the direct labour efciency variance ii. In the past, the 12 persons employed 1n the production of The Big Pot consisted of 4 experienced workers and 8 inexperienced assistants. During January, the company experimented with shifting the labour mix to 6 experienced workers and 6 inexperienced assistants. Would you recommend that the new labour mix be continued? Explain