Response to the following problem:
Whitecotton 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 (5 lbs @ $0.80) $ 4
Direct labor (1.5 hours @ $16.00) 24
Standard prime cost $28
During December, 52,000 pounds of material were purchased and used in production. There were 10,000 cases produced, with the following actual prime costs:
Direct materials $40,000
Direct labor 236,910 (for 14,900 hrs.)
Required:
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?