Megham Company Manufactures a Single Product During May, the Following Actual Activities Occurred: Material Purchased, 12,000

question 134

Essay

Megham Company manufactures a single product. The following standards have been developed for it:
$$\begin{array} { l l l } \text { Direct Material } & \text { 6 pounds } & \$ \text { 4/pound } \\\text { Direct Labor } & \text { 2hours } & \$ 15 / \text {hour}\end{array}$$
During May, the following actual activities occurred: Material purchased, 12,000 pounds for $45,600; material used in the production of 2,000 units of product, 13,000 pounds; direct labor, 3,500 hours costing $56,000.
Required:
(1) Compute the following variances:
(a) material quantity variance.
(b) labor rate variance.
(c) labor efficiency variance.
(2) Give one possible explanation for each of the 3 variances computed.

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