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Company manufactures soda cans. A unit of production is a case of 12 dozen cans. The following standards per case have been set DM = 4kg at $.60 per kg and DL .25 hours at $12 per hour.
Actual material purchases amounted to 240,000kg at $.58 per kg. Actual costs incurred in the production of 50,000 units were DM = $130,000 for 210,000kg and DL = $146,400 for 12,000 hours.
1.) use the variances formulas to compute the DM price and Qty variances and the direct-labor rate and efficiency variances. Indicate if each is F or Unfavorable.
2.) Make journal entries to record the material and labor variances.
3.) Based only on the #s comment on a likely reason for the labor variances and whether the management should consider a shift in the production strategy for labor. Are such assessments clear cut for material variances?
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