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Jake’s Cheese Company produces gourmet cheese for resale at local grocery stores. Jake’s expected to use 0.50 direct labor hours to produce one unit (batch) of product at a cost of $10 per hour. Actual results are in for last year, which indicates 45,000 batches of cheese were sold. The company's direct labor workforce worked 27,500 hours at $9 per hour.
Required:
(1) Calculate the labor rate variance.
(2) Calculate the labor efficiency variance.
(3) Suggest several possible reasons for the labor rate and efficiency variances.
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