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Variances - 20 minutes Prancer Ltd. manufactures glass ornaments that are decorated by hand. The company's standard costs per unit are as follows: Quantity Cost
Variances - 20 minutes Prancer Ltd. manufactures glass ornaments that are decorated by hand. The company's standard costs per unit are as follows: Quantity Cost Total Direct materials 30g $0.50/g $15.00 Direct labour 0.75 hours $12/DL hour $9.00 Manufacturing overhead 0.75 hours $5/DL hour $3,75) $27.75 The manufacturing overhead rate can be broken down between variable and fixed overhead. The company estimates fixed overhead to be $1.50 per direct labour hour. The company expected to make 800 ornaments using 600 direct labour hours during the month. Based on these estimates, variable overhead was budgeted to be $1,800 and fixed overhead was budgeted to be $1,200. In the month, the company actually made 780 ornaments. Actual variable overhead was $1.875 and actual fixed overhead was $1.050 In the month, the company actually made 780 ornaments. Actual variable overhead was $1,875 and actual fixed overhead was $1,050. The following information is known: 1) The company purchased 25,000g of direct materials for a total cost of $14,000. 2) The company had no beginning inventory and had 1,800g of material on hand at the end of the month. 3) The direct labour workforce worked a total of 560 hours and was paid $6,850. Required: a) Calculate the Direct Materials price and quantity variances b) Calculate the Direct Labour rate and efficiency variances c) 1) The company recently entered into a contract with a new supplier. Should the company continue to work with this supplier? il) The company experimented using more senior staff and fewer junior staff this month. Should the company continue with this labour mix
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