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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