Question $34$

Berlisle Inc. is a manufacturer of sails for small boats. The management is trying to get a better

understanding of their costs and are concerned with the variances that they have seen between

budgets and actual results. The budget is prepared each November at Berlisle and standards are

updated at that time, which stay in use for the next year.

A new quality initiative launched by management resulted in Berlisle deciding to go to a new

supplier to attain the material they are using in production, and recent political changes have

resulted in new tariffs of $$0\mathrm{.}20$ per meter. This is the first month that the tariffs have come into

effect. Labour costs seem to be too high, and the company is considering replacing some of the

more senior workers with younger workers and part$-$time workers that they feel they could pay

less money to$.$ The following information is available for Berlisle Inc for the month of March.

During the month, $12,000$ good units of product were produced:

Standard: $($budgeted expected usage per unit developed in the prior vear$)$

Material: $7\mathrm{.}0$ meters per unit at $$8\mathrm{.}00$ per meter

Labour: $1\mathrm{.}8$ hours per unit at $$24\mathrm{.}00$ per hour

Actual usage for March $2019$

Material purchases: $85,000$ meters at $$8\mathrm{.}35$ per meter $($landed cost$)$

Material used: $,81,500$ meters

Direct labour: $,20,700$ hours at $$25\mathrm{.}30$ per hour

a$)$ What is the material price and quantity variance? Is it faxourable or unfaxourable

b$)$ What is the labour rate and usage variance? Is it favourable or unfavourable.

c$)$ Based on your analysis, what recommendations would you make to the management of

Berlisle