Question 1

Pyre Mills, Inc. is a producer of men's and women's clothing. The company uses standard costs for all its products. The standard costs and actual costs per one unit of product for a recent period are given below:

Direct material:

Standard: 4.0 square meters at $5.40 per square meter

Actual: 4.4 square meters at $5.05 per square meter

Direct labour:

Standard: 1.6 hours at $6.75 per hour

Actual: 1.4 hours at $7.30 per hour

During this period, the company produced 4,800 units of this product

There was no inventory of materials on hand at the beginning of the period. During the period, 26,000 square meters of material were purchased, and 21,120 square meters were used in production.

Required:

1. For direct materials, compute the price and quantity variances for the period. Indicate for each variance if it is favourable or unfavourable. Provide a reasonable explanation for the quantity variance.

b. For direct labour, compute the rate and efficiency variances for the period. Indicate for each variance if it is favourable or unfavourable. Provide a reasonable explanation for the rate variance. (5 marks)