Botella company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established:
- Direct materials (4lbs @ $0.95) $3.80
- Direct Labor (1.25 hours @ $15.00) $18.75
- Standard prime cost $22.55
During December, 78,000 pounds of material were purchased and used in production. There were 15,000 cases produced, with the following actual prime costs:
- Direct materials $74,000
- Direct Labor $315,000 (for 22,500 hrs.)
1. Compute the materials variances.
2. Compute the labor variances.
3. What are the advantages and disadvantages that can result from the use of a standard costing system?