Camping Supply Company has developed a new camping lamp that runs on solar power. The solar cells charge in the sun all day and then the lamp is ready to run when the sun goes down. The company has a standard costing system to help control costs and has established the following standards related to the new camping lamp:
Direct materials: 3 small solar cells per lamp at $0.60 per cell
Direct labour: 0.75 hours per lamp at $12 per hour
During March, the company produced 4,000 camping lights. Production data for March are as follows:
Direct materials: 20,000 small solar cells were purchased at a cost of $0.65 per cell; 6,000 of these were still in inventory at the end of the month (there was no opening inventory).
Direct labour: 3,100 direct labour-hours were worked at a cost of $35,000.
Required:
1. Compute the following variances for March:
a. Direct materials price and quantity variances.
b. Direct labour rate and efficiency variances.
2. Prepare a brief explanation of the possible causes of each variance.