Give potential reasons for each of the variancesnbspnbspbe

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Reference no: EM13593274

Rhodes Corporation manufactures a product with the following standard costs:

Direct materials (20 yards @ $1.85 per yard)	$ 37.00
Direct labor (4 hours @ $12.00 per hour)	48.00
Variable factory overhead (4 hours @ $5.40 per hour)	21.60
Fixed factory overhead (4 hours @ $3.60 per hour)	14.40
Total standard cost per unit of output	$121.00

Standards are based on normal monthly production involving 2,000 direct labor hours.

The following information pertains to the month of July:

Direct materials purchased (16,000 yards @ $1.80 per yard)	$28,800
Direct materials used (9,400 yards)
Direct labor (1,880 hours @ $12.20 per hour)	22,936
Actual factory overhead	16,850
Actual production in July: 460 units

a.	Compute the following variances for the month of July, indicating whether each variance is favorable or unfavorable:

	(1)	Materials purchase price variance
	(2)	Materials quantity variance
	(3)	Labor rate variance
	(4)	Labor efficiency variance

b. Give potential reasons for each of the variances. Be sure to consider inter-relationships among variances.

Reference no: EM13593274

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