(JIT variances) Tom Sawyer uses a JIT system in his manufacturing firm, which makes “Purrr,” for cats. Tom provides you with the following standards for a can of “Purrr”:

The standards were changed because of a nutritional (engineering) adjustment. Production during June was 60,000 cans of “Purrr.” Usage of raw materials (all purchased at standard costs) was 250,000 ounces of component X and 108,000 ounces of component Y.

a. Calculate the material quantity variance for each component.

b. Calculate the engineering change variance for each component.

c. Why would a company implement an engineering change that increases the standard production cost by 20 percent?

Transcribed Image Text:

ANNUAL MATERIAL STANDARDS: 5 ounces of component X @ $.10 1 ounce of component Y @ $.25 $.50 .25 $.75