nstructions (a) Compute the direct labour rate and efficiency variances. (b) Compute the direct materials price and quantity variances. (c) Prepare a brief explanation of the possible causes of the above material price and quantity variances.
BwA Woodturning is a small company that operates in Northern Ontario. The company produces and sells a single product – Gemwood Ice-cream Scoop. The product is made of thin strips of Baltic Birch that are dyed and glued together. The
Standard Costs
Per Unit
Direct materials
0.15 square meters at $85 per square meter
Direct labour
0.85 direct labour hours at $32 per hour
Variable
0.85 direct labour hours at $2.50 per hour
Fixed overhead
0.85 direct labour hours at $6.30 per hour
The following additional information is available for the fiscal 2020 just completed:
BwA Woodturning manufactured 23,875 Gemwood Ice-cream scoops during the year.
A total of 3,490 square meters of material was purchased during the year at a cost of $83.50 per square meter. All of this material was used to manufacture the 23,875 ice-cream scoops. There were no beginning or ending inventories for the year.
The company worked 20,090 direct labour-hours during the year at a cost of $34.30 per hour.
The actual variable overhead for fiscal 2020 was $55,808 and the actual fixed overhead was $127,850.
Instructions
(a) Compute the direct labour rate and efficiency variances.
(b) Compute the direct materials price and quantity variances.
(c) Prepare a brief explanation of the possible causes of the above material price and quantity variances.
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