The Firebrand Hot Sauce Company is a distributor providing retailers with the ul

Question

The Firebrand Hot Sauce Company is a distributor providing retailers with the ultimate experience in heated food additives. For one of its sauces, Firebrand's standards budget $1.50 per gallon to purchase the sauce from a bayou farmer. It pours the sauce into bottles provided by retailers so each bottle appears to be the unique product of each retailer. Then, a shipping employee places the bottles in cardboard cases for shipment. Each case of bottles should require 5 gallons of sauce. It should take 1/2 hour to pour and place the bottles in each case. The budgeted wage rate is $15 per hour. Last month, Firebrand produced 15,000 cases of sauce using 76,000 gallons. (It purchased 65,000 gallons for $91,000.) Seven thousand five hundred hours of labor were required, costing $105,000. Calculate Firebrand's sauce price variance. a. $6,200 F b. $6,500 F c. $6,200 U d. $6,500 U e. none of the above are correct Calculate Firebrand's labor rate variance. a. $7,500 F b. $7,500 U c. $6,500 U d. $6,500 F e. none of the answers are correct Calculate Firebrand's labor efficiency variance. a. $1,200 F b. $1,200 U c. $0 d. $1,500 F e. none of the answers above are correct.

Explanation / Answer

The Firebrand Hot Sauce Company is a distributor providing retailers with the ultimate experience in heated food additives. For one of its sauces, Firebrand's standards budget $1.50 per gallon to purchase the sauce from a bayou farmer. It pours the sauce into bottles provided by retailers so each bottle appears to be the unique product of each retailer. Then, a shipping employee places the bottles in cardboard cases for shipment. Each case of bottles should require 5 gallons of sauce. It should take 1/2 hour to pour and place the bottles in each case. The budgeted wage rate is $15 per hour. Last month, Firebrand produced 15,000 cases of sauce using 76,000 gallons. (It purchased 65,000 gallons for $91,000.)

Seven thousand five hundred hours of labor were required, costing $105,000. Calculate Firebrand's sauce price variance

. a. $6,200 F

b. $6,500 F

c. $6,200 U

d. $6,500 U

e. none of the above are correct

(Standard price

-

Actual price)

×

Qty. purchased

a .

($1.25/gallon

-

$1.15/gallon)

×

62,000 gallons

=

$6,200 F

================

Calculate Firebrand's labor rate variance.

a. $7,500 F

b. $7,500 U

c. $6,500 U

d. $6,500

F e. none of the answers are correct

$12 per hour

-

$12/hour)

×

7,400 hours

=

$0

==================

Calculate Firebrand's labor efficiency variance.

a. $1,200 F

b. $1,200 U

c. $0

d. $1,500

F e. none of the answers above are correct.

(7,500 hours

-

7,400 hours)

×

$12/hour

=

$1,200 F

(Standard price

-

Actual price)

×

Qty. purchased

a .

($1.25/gallon

-

$1.15/gallon)

×

62,000 gallons

=

$6,200 F

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