Chapter 7, Problem 7.37P

Possible causes for price and efficiency variances. You have been invited to interview for an internship with an international food manufacturing company. When you arrive for the interview, you are given the following information related to a fictitious Belgian chocolatier for the month of June. The chocolatier manufactures truffles in 12-piece boxes. The production is labor intensive, and the delicate nature of the chocolate requires a high degree of skill.

Actual
Boxes produced	10,000
Direct materials used in production	2,150,000 g
Actual direct material cost	60,200 euro
Actual direct manufacturing labor-hours	1,100
Actual direct manufacturing labor cost	12,650 euro
Standards
Purchase price of direct materials	0.03 euro/g
Materials per box	200 g
Wage rate	12 euro/hour
Boxes per hour	10

Please respond to the following questions as if you were in an interview situation:

1. 1. Calculate the materials efficiency and price variance and the wage and labor efficiency variances for the month of June.

Required

1. 2. Discuss some possible causes of the variances you have calculated. Can you make any possible connection between the material and labor variances? What recommendations do you have for future improvement?