Problem: Saskatchewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.
Direct labor: Direct material:
Quantity, .25 hour Quantity, 4 kilograms
Rate, $16 per hour Price, $.80 per kilogram
Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:
Direct labor: $211,900 for 13,000 hours
Direct materials: $170,100 for 210,000 kilograms
1. Compute the direct-material quantity variance and determine whether it is favorable or unfavorable.
2. Compute the direct-labor rate variance and indicate whether it is favorable or unfavorable.
3. Calculate the direct labor efficiency variance and indicate whether it is favorable or unfavorable.