Given the Following Data for LXG Corporation

question 85

Essay

Given the following data for LXG Corporation:
Standard direct materials per unit 4 ml.
Standard direct labour hours per unit 1.5 hours
Standard direct materials price $5 per ml.
Standard direct labour rate $6 per hour
Production (in finished or equivalent units)2,000 units
Actual direct labour hours 2,200 hrs
Actual direct labour cost $23,490
Actual direct materials used 7,800 ml.
Units sold 1,400 units
Direct materials purchased 8,000 ml.
Cost of direct materials purchased $34,000
a)Calculate the direct material and direct labour price and efficiency variances.
b)Suggest two possible causes for the largest variance in part (a). For each cause you identify, describe an appropriate action (if any)that managers should take.
c)Describe two general factors that managers should consider in deciding whether to investigate the variances in part (a).

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Definitions:

Market Power

The ability of a firm or group of firms to influence or control the terms and conditions of a market, including prices.

Monopolistic Competition

A market structure characterized by many firms offering similar but not identical products, resulting in some degree of market power for each firm.

Differentiate Their Product

The strategy companies use to make their product or service stand out from competitors.

Industry Market Structure

Refers to the organization and characteristics of a particular market, including the number and size of firms, and the level of competition.