Question:
1. Given the following data for LXG Corporation:
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Standard direct materials per unit
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4 oz.
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Standard direct labor hours per unit
|
1.5 hours
|
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Standard direct materials price
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$5 per oz.
|
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Standard direct labor rate
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$6 per hour
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Production (in finished or equivalent units)
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2,000 units
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Actual direct labor hours
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2,200 hrs
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Actual direct labor cost
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$23,490
|
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Actual direct materials used
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7,800 oz.
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Units sold
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1,400 units
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Direct materials purchased
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8,000 oz.
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Cost of direct materials purchased
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$34,000
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a. Calculate the direct material and direct labor 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).