Royal Tables Ltd manufactures tables using high quality wood and skilled labor using mainly traditional manual techniques. The manufacturing department is a cost center within the business and operates a standard costing system based on marginal costs.

Standard cost Standard cost

Selling price 68

Materials (2kg at $5/kg) 10

Labor (3hrs at $12 per hour) 36

Marginal cost 46

Contribution 22

In November 2016 the budgeted sales were 19,000 tables and the actual information is as follows:

(i) 40,000 kg of wood was bought for $196,000 which produced 19,200 tables.

(ii) No inventory of raw materials is held.

(iii) The labor was paid for 62,000 hours and the total cost was $682,000.

(iv) The sales price was reduced to protect the sales. However, only 18,000

tables were sold at an average price of $65.

Required:

a) Calculate the following variances for November 2016:

(i) Materialpricevariance (ii) Materialusagevariance (iii) Labor rate variance

(iv) Labor efficiency variance (v) Sales price variance

(vi) Sales volume variance

b) Explain two possible causes of the labor variances you have calculated.

c) Explain three possible causes of material price variances you have calculated.