Question - Beary Company produces stuffed bears. Based on their history they typically use 3 pounds of material for each bear, costing $5 per pound. Each bear is expected to have direct labor of 1 hour at a rate of $9.50. In the month of January the company produced 150,000 bears. They had direct materials of 455,000 pounds, costing on average $4.95. Direct labor was 142,000 hours at an average wage of $10.
1. Compute the Materials Price variance, Materials Usage variance and the Total Materials Variance
2. Compute the Labor Rate Variance, Labor Efficiency Variance, and the total Labor Variance.
3. Assume the company only investigates variances if they are $7,500 or more. Should they investigate? And if so, would the answer be different if they were to only look at the total variances?