1. For direct materials: a. Compute the price and quantity variances. b. The materials were purchased from a new supplier who is anxious to enter into a long- term purchase contract. Would you recommend that the company sign the contract? Explain. 2. For labor employed in the production of Fruta: a. Compute the rate and efficiency variances. b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? Explain. 3. Compute the variable overhead rate and efficiency variances. What relation can you see between this efficiency variance and the labor efficiency variance?
1. For direct materials: a. Compute the price and quantity variances. b. The materials were purchased from a new supplier who is anxious to enter into a long- term purchase contract. Would you recommend that the company sign the contract? Explain. 2. For labor employed in the production of Fruta: a. Compute the rate and efficiency variances. b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? Explain. 3. Compute the variable overhead rate and efficiency variances. What relation can you see between this efficiency variance and the labor efficiency variance?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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![1. For direct materials:
a. Compute the price and quantity variances.
b. The materials were purchased from a new supplier who is anxious to enter into a long-
term purchase contract. Would you recommend that the company sign the contract?
Explain.
2. For labor employed in the production of Fruta:
a. Compute the rate and efficiency variances.
b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior
workers and 6 assistants. During June, the company experimented with 5 senior workers
and 5 assistants. Would you recommend that the new labor mix be continued? Explain.
3. Compute the variable overhead rate and efficiency variances. What relation can you see
between this efficiency variance and the labor efficiency variance?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5ec59a99-d3ac-4a4b-b846-ae6ac5768301%2Fd0262724-2729-443c-86c8-979d21cb6183%2Fkob61x.png&w=3840&q=75)
Transcribed Image Text:1. For direct materials:
a. Compute the price and quantity variances.
b. The materials were purchased from a new supplier who is anxious to enter into a long-
term purchase contract. Would you recommend that the company sign the contract?
Explain.
2. For labor employed in the production of Fruta:
a. Compute the rate and efficiency variances.
b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior
workers and 6 assistants. During June, the company experimented with 5 senior workers
and 5 assistants. Would you recommend that the new labor mix be continued? Explain.
3. Compute the variable overhead rate and efficiency variances. What relation can you see
between this efficiency variance and the labor efficiency variance?
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