Toraxia Inc. manufacturers a product that is packaged and sold in 10-kilogram bags. For 2023, the company developed the following standard costs per bag for direct materials and direct labour: Direct materials (10 kilograms @ $6.00 per kilogram) Direct labour (0.2 hours @ $28 per hour) Total standard cost per 10-kg bag Cost per Bag $60.00 5.60 ($65.60) In January, the company manufactured 3,500 bags. The company purchased 38,200 kilograms of materials costing $232,256 and used 36,500 kilograms. As well, the company paid $19,440 for direct labour and used 720 direct 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? Do not give answer in image
Toraxia Inc. manufacturers a product that is packaged and sold in 10-kilogram bags. For 2023, the company developed the following
Direct materials (10 kilograms @ $6.00 per kilogram) Direct labour (0.2 hours @ $28 per hour)
Total standard cost per 10-kg bag
Cost per Bag
$60.00
5.60
($65.60)
In January, the company manufactured 3,500 bags. The company purchased 38,200 kilograms of materials costing $232,256 and used 36,500 kilograms. As well, the company paid $19,440 for direct labour and used 720 direct 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?
Do not give answer in image
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