Chapter 8, Problem 6P

Analysis of materials and labor variances

RDI Products Co. manufactures a variety of products made of plastic and aluminum components. During the winter months, substantially all of the production capacity is devoted to the production of lawn sprinklers for the following spring and summer seasons. Other products are manufactured during the remainder of the year.

The company has developed standard costs for its several products. Standard costs for each year are set in the preceding October. The standard cost of a sprinkler for the current year is $3.70, computed as follows:

During February, RDI Products manufactured 8,500 good sprinklers. The company incurred the following costs, which it charged to production:

Materials price variations are not determined by usage but are charged to a materials price variation account at the time of purchase. All materials are carried in inventory at standard prices. Materials purchases for February were as follows:

Required:

Calculate price and usage variances for each type of material and for labor, using the formulas on pages 421–422 and 424.