Easton Industries Developed the Following Standards for One of Its

question 21

Essay

Easton Industries developed the following standards for one of its products:
$\begin{array}{lccccc}\text { Material } & 5 \text { feet } & \$ 15 / \text { foot } & \$ 75 \\\text { Labor } & 10 \text { hours } & \$ 15 / \text { hour } & \$ 150\\\text { Total variable cost }&&&\$225\end{array}$

Actual results for September were:
$$\begin{array} { | l | l | } \hline \text { Units produced } & 12,000 \\\hline \text { Material purchased } & 40,000 \text { feet for } \$ 14.25 / \text { foot } \\\hline \text { Material used } & 70,000 \text { feet } \\\hline \text { Direct Labor } & 119,500 \text { hours at } \$ 15.10 / \text { hour } \\\hline\end{array}$$
Required:
(1) Calculate the following variances:
(a) Material purchase price variance.
(b) Material quantity variance.
(c) Labor rate variance.
(d) Labor efficiency variance.
(2) Why would it be inappropriate to calculate the material price variance at the time the material is used; might there be a situation when it might be all right to do so?

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Definitions:

Final Production Department

The last stage in a manufacturing process where products are completed and ready for sale or distribution.

Completed Goods

Products that have undergone all stages of production and are ready for sale or distribution to customers.

Process Cost Summary

A report that aggregates the total costs involved in manufacturing a product within a specific period, breaking these down into per-unit costs.

Sequential Steps

The order in which tasks or processes must be completed, one after another, in a specific sequence.