Waterways Continuing Problem 12

At the end of June the manager of the B.C. manufacturing plant was provided with the following variance analysis report.

		Budget		Actual		Variance		Favourable (F)/ Unfavourable (U)
Production in units		334,000		349,000		15,000		F
Production costs:
Direct material		$699,029		$707,184		$(8,155)		U
Direct labour		1,586,500		1,623,380		(36,880)		U
Variable overhead costs		133,600		138,869		(5,269)		U
Fixed overhead costs		200,400		195,845		4,555		F
Total production costs		$2,619,529		$2,665,278		$(45,749)		U

The manager immediately called the production supervisor, demanding an explanation for the large unfavourable variance for the quarter. The production supervisor was puzzled. He thought the cost-cutting measures they had incorporated were beginning to work. He certainly wasnt expecting such a large discrepancy. The standard rates the plant was using with its normal costing system are summarized below.

		Volume			Cost
Direct material		1.30	kg per unit		$1.60	per kg
Direct labour		0.25	hour per unit		$19.00	per hour
Predetermined overhead rate:
Variable		0.25	hour per unit		$1.60	per hour
Fixed		0.25	hour per unit		$2.40	per hour

Other relevant information:

1.		A total of 461,000 kg of direct materials were purchased during the quarter at a cost of $1.80 per kilogram.
2.		A total of 441,990 kg of direct materials were used in production to manufacture 349,000 units.
3.		Payroll recorded 86,350 direct labour hours at an average cost of $18.80 per hour.

Calculate the following production variances.

Material price variance		$	Neither favourable nor unfavourableFavourableUnfavourable
Material quantity variance		$	UnfavourableFavourableNeither favourable nor unfavourable
Labour price variance		$	Neither favourable nor unfavourableFavourableUnfavourable
Labour efficiency variance		$	Neither favourable nor unfavourableFavourableUnfavourable
Variable overhead variance		$	FavourableUnfavourableNeither favourable nor unfavourable