Question:

Manilow Company makes a perfume called Allure. The standard cost for one bottle of Allure is as follows:

Direct material 6 oz at $0.90 per oz

Direct labour 0.5 hours at $12.00 per hour

During the month, the following transactions occurred in manufacturing 10,000 bottles of Allure:

i. 58,000 oz of materials were purchased at $1.00 per oz

ii. All materials purchased were used to produce the 10,000 bottles of Allure

iii. 4,900 direct labour were worked at a total labour cost of $56,350

Required:

A. Compute the following variance and state if they are favourable or adverse

i. material price

ii. material usage

iii. labour rate

iv. labour efficiency

B. Outline two possible causes for EACH of the variances calculated above.