Response to the following problem:
Camisa Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored.
The following standards for changeover for a given batch have been established:
Direct materials (2.5 lbs. @ $0.90) $2.25
Direct labor (0.75 hr. @ $7.00) 5.25
Standard prime cost $7.50
During the year, 53,000 pounds of material were purchased and used for the changeover activity. There were 20,000 batches produced, with the following actual prime costs:
Direct materials $42,000
Direct labor 102,000 (for 14,900 hrs.)
Required:
Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable.