Problem
Swings Incorporated makes one product, a wooden swing made entirely by hand. The company planned to make 4,000 swings during the month, but because of unexpected demand was able to complete 4,200 swings. In order to be able to meet the excess demand, the company hired less experience workers. The standard cost of each swing is as follows: Standard materials 120 feet of lumber Standard cost $ 4 per foot Standard labor hours 25 hours Standard labor rate $15 per hour Because the company was not able to get its usual high grade of lumber, more lumber was needed. The company purchased 530,000 feet of lumber and used 515,000 feet of lumber at $3.50 per foot. Material price variances are the responsibility of the purchasing manager, while material quantity variances are the responsibility of the production manager. The company paid total labor charges of $1,365,000 because 26 hours were needed to complete each swing using the lower-quality lumber.
Calculate each of the following and state whether the variance is favorable (F) or unfavorable (U):
a. labor efficiency variance
b. labor rate variance
c. materials quantity variance
d. materials price variance.