Response to the following problem:
Trieste Toy Company manufactures only one product, Robot Ranger. The company uses a standard cost system and has established the following standards per unit of Robot Ranger:
STANDARD QUANTITY STANDARD PRICE STANDARD COST
Direct materials 3.0 pounds $12 per pound $36.00 per unit
Direct labor 1.2 hours 15 per hour 18.00 per unit
During November, the company recorded the following activity:
The company produced 6,000 units.
A total of 21,000 pounds of material were used, purchased at a cost of $241,500.
The company employs 40 persons to work on the production of Robot Ranger. These employees worked an average of 160 hours at an average rate of $16 per hour.
The company's management wishes to determine the efficiency of the activities related to the production of Robot Ranger.
Required:
(a) For direct materials used in the production of Robot Ranger, compute the direct material price variance and the direct material quantity variance.
(b) The direct materials were purchased from a new supplier who is eager to enter into a long-term purchase contract. Would you recommend that Trieste sign the contract? Explain.
(c) For direct labor employed in the production of Robot Ranger, compute the direct labor rate variance and the direct labor efficiency variance.
(d) In the past, the 40 persons employed in the production of Robot Ranger consisted of 16 experienced workers and 24 inexperienced assistants. During November, the company experimented with 20 experienced workers and 20 inexperienced assistants. Would you recommend that Trieste continue the new labor mix?Explain.