Nojar Inc. manufacturers a product that is packaged and sold in 30-kilogram bags. For 2022, the company developed the following standard costs per bag for direct materials and direct labour: Direct materials (30 kilograms @ $4.50 per kilogram) Direct labour (0.2 hours @ $30 per hour) Total standard cost per 30-kg bag $135.00 6.00 S141.00 For April, the company manufactured 2,500 bags. The company purchased 78,000 kilograms of input costing $344,760 and used 76,200 kilograms. As well, the company paid $15,360 for direct labour and used 480 labour hours. Required: (A) Compute the materials price variance and materials usage variance and indicate whether each variance is favourable or unfavourable. (B) Compute the labour rate variance and labour efficiency variance and indicate whether each variance is favourable or unfavourable. (C) Provide possible reasons for each of the variances computed in (A) and (B). For example, regarding the materials price variance, why would the variance be favourable / unfavourable?
Nojar Inc. manufacturers a product that is packaged and sold in 30-kilogram bags. For 2022, the company developed the following standard costs per bag for direct materials and direct labour: Direct materials (30 kilograms @ $4.50 per kilogram) Direct labour (0.2 hours @ $30 per hour) Total standard cost per 30-kg bag $135.00 6.00 S141.00 For April, the company manufactured 2,500 bags. The company purchased 78,000 kilograms of input costing $344,760 and used 76,200 kilograms. As well, the company paid $15,360 for direct labour and used 480 labour hours. Required: (A) Compute the materials price variance and materials usage variance and indicate whether each variance is favourable or unfavourable. (B) Compute the labour rate variance and labour efficiency variance and indicate whether each variance is favourable or unfavourable. (C) Provide possible reasons for each of the variances computed in (A) and (B). For example, regarding the materials price variance, why would the variance be favourable / unfavourable?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Nojar Inc. manufacturers a product that is packaged and sold in 30-kilogram bags. For 2022, the
company developed the following standard costs per bag for direct materials and direct labour:
Direct materials (30 kilograms @ $4.50 per kilogram)
Direct labour (0.2 hours @ $30 per hour)
Total standard cost per 30-kg bag
$135.00
6.00
S141.00
For April, the company manufactured 2,500 bags. The company purchased 78,000 kilograms of
input costing $344,760 and used 76,200 kilograms. As well, the company paid $15,360 for direct
labour and used 480 labour hours.
Required:
(A) Compute the materials price variance and materials usage variance and indicate
whether each variance is favourable or unfavourable.
(B) Compute the labour rate variance and labour efficiency variance and indicate whether
each variance is favourable or unfavourable.
(C) Provide possible reasons for each of the variances computed in (A) and (B). For
example, regarding the materials price variance, why would the variance be
favourable / unfavourable?
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