Canandaigua Container Company manufactures recyclable soft-drink cans. A unit of

Question

Canandaigua Container Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.

Actual material purchases amounted to 156,400 kilograms at $0.610 per kilogram. Actual costs incurred in the production of 34,000 units were as follows:

Required: 1. Use the variance formulas to compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculations.)

Direct labor Direct labor Quantity, 0.22 hour Quantity, 3 kilograms Rate, $11.00 per hour Price, $0.54 per kilogram

Explanation / Answer

Direct material price variance = ( Standard Price - Actual Price ) * Actual Materials

= ( 0.54-0.61) * 115600 i.e 8092 Unfavourable

Direct material quantity variance = ( Standard quantity - Actual Quantity ) *Standard price

= ( 102000-115600) * 0.54 i.e 7344 Unfavourable

Direct material purchase price variance = ( Standard price - Actual Price ) * Actual Material Purchased

= ( 0.54-0.61) *156400 i.e 10948 Unfavourable

Labour rate variance = ( Standard Rate - Actual Rate ) * Actual Hours

= ( 11-11.40) *8160 i.e 3264 Unfavourable

Laboue efficiency variance = ( Standard hours - Actual Hours ) * Standard Rate

= ( 7480-8160) *11 i.e 7480 Unfavourable

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