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Summertime Soda (Soda Inc.) has prepared the following standard cost information per bottle of soda: Standard Quantity Standard Price (or Standard Cost (or Hours) Rate)
Summertime Soda ("Soda Inc.") has prepared the following standard cost information per bottle of soda: Standard Quantity Standard Price (or Standard Cost (or Hours) Rate) 1.0 litre $2.15/litre $2.15 Direct materials Direct labour 0.1 hours $16.00/hr $1.60 $3.00/hr $0.30 Variable overhead 0.1 hours Total standard cost per bottle $4.05 The company allocates variable overhead based on direct labour hours. Last month, Soda Inc. produced 1,300 bottles of soda and incurred the following actual costs: Direct materials: Purchased 1,400 liters of organic liquid soda sugars at $2.05 per litre. 1,350 litres of liquid sugars were used in production of 1,300 bottles. Direct labour 120 hours worked, for a total cost of $1,962. Variable overhead: Total cost was $320. Required (12 marks): a) Part 1. Calculate the direct materials price and quantity variances. Label your variances and indicate if favourable or unfavourable. (4 marks). Part 2. For each variance provide a brief discussion on the factor(s) or reason(s) the variance may have occurred in this situation. This discussion should go more in depth than, "the price went up or down." It should explain why this may have occurred. (2 marks) b) Part 1. Calculate the direct labour rate and efficiency variances. Label your variances and indicate if favourable or unfavourable. (2 marks) Part 2. For each variance provide a brief discussion on the factor(s) or reason(s) the variance may have occurred in this situation. This discussion should go more in depth than, "the price went up or down." It should explain why this may have occurred. (2 marks) c) Calculate the variable overhead spending and variable overhead efficiency variances. Label your variances and indicate if favourable or unfavourable. (2 marks)
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