Chapter 11, Problem 11.23AE

Calculate the material and labor variances (Learning Objectives 2 & 3)

Boat Guard, which used a standard cost accounting system, manufactured 210,000 boat fenders during the year, using 1,780,000 feet of extruded vinyl purchased at $1.30 per foot. Production required 4,900 direct labor hours that cost $13.00 per hour. The materials standard was 8 feet of vinyl per fender at a standard cost of $1.40 per foot. The labor standard was 0.024 direct labor hour per fender at a standard cost of $12.00 per hour.

Requirements

1. 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor.
2. 2. Does the pattern of variances suggest that the company’s managers have been making trade-offs? Explain.