Standard Costing, Planned Variances

Phono Company manufactures a plastic toy cell phone. The following standards have been established for the toys materials and labor inputs:

	Standard Quantity		Standard Price (rate in $)		Standard Cost
Direct materials	0.5 lb.		$ 1.50		$0.75
Direct labor	0.15 hr.		10.00		1.50

During the first week of July, the company had the following results:

Units produced	90,000
Actual labor costs	$144,900
Actual labor hours	14,070
Materials purchased and used	42,040	lbs. @ $1.40 per lb

The purchasing agent located a new source of slightly higher-quality plastic, and this material was used during the first week in July. Also, a new manufacturing layout was implemented on a trial basis. The new layout required a slightly higher level of skilled labor. The higher-quality material has no effect on labor utilization. Similarly, the new manufacturing approach has no effect on material usage. Round all variances to the nearest dollar.

Required:

1. Conceptual Connection: Compute the materials price and usage variances.

Materials price variance	$fill in the blank 1	Favorable
Materials usage variance	$fill in the blank 3	Favorable

2. Conceptual Connection: Compute the labor rate and efficiency variances.

Labor rate variance	$fill in the blank 6	Unfavorable
Labor efficiency variance	$fill in the blank 8	Unfavorable

Should the new layout be adopted? Assume the variances are attributable to the new layout. Yes If so, what would be the projected annual savings