Question:
Possible causes for price and efficiency variances. You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the finance department. This company is known for its rigorous case-based interview process. One of the students who successfully obtained a job with them upon graduation last year advised you to "know your variances cold!" When you inquired further, she told you that she had been asked to pretend that she was investigating wage and materials variances. Per her advice, you have been studying the causes and consequences of variances. You are excited when you walk in and find that the first case deals with variance analysis. You are given the following data for May for a detergent bottling plant located in Mexico:
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Actual
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Bottles filled
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340,000
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Direct materials used in production
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6,150,000 oz.
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Actual direct material cost
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2,275,500 pesos
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Actual direct manufacturing labor-hours
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26,000 hours
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Actual direct labor cost
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784,420 pesos
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Standards
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|
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Purchase price of direct materials
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0.36 pesos/oz
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Bottle size
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15 oz.
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Wage rate
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29.25 pesos/hour
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Bottles per minute
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0.50
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Please respond to the following questions as if you were in an interview situation:
1. Calculate the materials efficiency and price variance, and the wage and labor efficiency variances for the month of May.
2. You are given the following context: "Union organizers are targeting our detergent bottling plant in Puebla, Mexico, for a union." Can you provide a better explanation for the variances that you have calculated on the basis of this information?