Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not ideal at this point, but the management is working toward that as a goal. At present, the company uses the following standards.

Materials
Item		Per unit		Cost
Metal Plastic Rubber		1 lb. 12 oz. 4 oz.		63 per lb. $1.00 per lb. 88 per lb.
Direct Labor
Item		Per unit		Cost
Labor		15 min.		$8.00 per hr.
Predetermined overhead rate based on direct labor hours = $4.28

The January figures for purchasing, production, and labor are:

The company purchased 229,000 pounds of raw materials in January at a cost of 78 a pound.

Production used 229,000 pounds of raw materials to make 115,500 units in January.

Direct labor spent 18 minutes on each product at a cost of $7.80 per hour.

Overhead costs for January totaled $54,673 variable and $73,800 fixed.

Instructions

Answer the following questions about standard costs.

(g) Evaluate the variances for this company for January. What do these variances suggest to management?