Question 12 (8 points)

Smarty Pants Company makes a product called "S". The standard cost card for one unit of "S" follows:

Direct Material 2 kgs. @ 10/kg. $20

Direct Labour 3 hours @ $30/hr. $90

Total DM and DL $110 per unit

Budgeted production in the period 200 units

Actual results in the period:

Actual units produced 111 units

Direct Material 240 kgs. used $3,000 total

Direct Labour 320 hours $11,200 total

Required:

1. Calculate the direct materials price variance and the direct materials efficiency/quantity variance. And Indicate if each variance is Favourable or Unfavourable. Show all your work.
2. Calculate the direct labour price variance and the direct labour efficiency variance. Identify if each variance is Favourable or Unfavourable. Show your work.
3. The boss was really happy because the total actual costs for materials and labour were lower than budgeted costs (i.e. $22,000). How would you respond to the boss. Be as brief as possible.