Question
Solidago operates several US manufacturing facilities, one of which produces fine kitchen knives for home chefs. The standard cost sheet for one of these knives
Solidago operates several US manufacturing facilities, one of which produces fine kitchen knives for home chefs. The standard cost sheet for one of these knives calls for the following: 0.5 pound of high-quality steel @ $15/pound 0.25 pound of industrial-quality titanium @ $9.50/pound 0.5 direct labor hour @ $42/hour
During the month of June, Solidago produced 50,000 knives, which is a new production record. June production consumed 27,000 pounds of steel at a total cost of $387,600 and 12,100 pounds of titanium at a total cost of $115,160. Production used 27,500 direct labor hours at a total cost of $1,200,250.
- Show calculations for the direct materials price variance and the direct materials quantity variance for EACH material.
- Show calculations for the direct labor rate variance and the direct labor efficiency variance.
- Supply chain pressures and labor shortages have severely stressed Solidagos ability to continue operating. To continue, they will need to pay $20/pound for steel and raise their wages to $47/hour. How, if at all, should Solidago incorporate this new information into their planning for July production? Production levels for July are expected to be virtually identical to Junes.
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