Question 3 (Total 23 marks)

GG Co. has the following standard costs for a unit of Product A.

Direct labor: 1.2 standard hours at $20.00 per hour

Direct material: 1.5 pounds at $4.00 per pound

Last month, 3,400 pounds of material were purchased and used to make 2,000 units of Product A. The material costed a total of $13,260. Employees actually worked 2,500 hours at a total labor cost of $52,250.

Required:

Calculate the following variances, staying whether the variance is favorable (F) or unfavorable (U): i. Direct material price variance.

ii. Direct material usage variance.

iii. Direct labor price variance.

iv. Direct labor usage variance.

v. Give Two reasons why the usage variance for direct material might be reported.

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(5 marks) (5 marks) (5 marks) (5 marks) (3 marks)