Market Manufacturing Inc The Records for March Showed the Following Actual Results

question 149

Essay

Market Manufacturing Inc. has developed the following standards for one of its products. The materials are not substitutable.
$\begin{array}{lllrcr}\text { Material 1 } & \text { 5yards } & \$ 6 / \text { yard } & \$ 30 \\\text { Material 2 } & \text { 6pieces } & \$ 5 / \text { piece } & \$ 30 \\\text { Direct labor } & \text { 3hours } & \$ 24 / \text { hour } & \$ 72 \\\text { Total variable cost per unit }&&&\$132\end{array}$
The records for March showed the following actual results:
$$\begin{array} { | l | l | l | } \hline \text { Material 1 } & \text { Purchased } & 10,000 \text { yards for } \$ 58,000 \\\hline & \text { Used } & 9,500 \text { yards } \\\hline \text { Material 2 } & \text { Purchased } & 15,000 \text { pieces for } \$ 78,750 \\\hline & \text { Used } & 12,100 \text { pieces } \\\hline \text { Direct labor } & & 5,900 \text { hours for } \$ 147,500 \\\hline \text { Units produced } & & 2,000 \text { units } \\\hline\end{array}$$
Required:
(1) Calculate the following variances:
(a) Material purchase price variance for material 1.
(b) Material quantity variance for material 1.
(c) Material purchase price variance for material 2.
(d) Material quantity variance for material 2.
(e) Labor rate variance.
(f) Labor efficiency variance.
(2) Give at least one possible cause for each of the following variances:
(a) material 2 quantity variance.
(b) labor rate variance.
(c) labor efficiency variance.

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Definitions:

Irrelevant Costs

Costs that should not be considered in decision-making because they will not be affected by the decision.

Direct Fixed Manufacturing Costs

Costs that are directly attributable to the production process and do not vary with the level of output but remain constant within a specific time period.

Component

A part or element of a larger system, device, or piece of equipment that is essential to its function.

Variable Expenses

Costs that change in relation to the level of activity or volume of production.