Question:
Materials and labor variances
Ichiro Inspections, Inc., specializes in determining whether a building or house's drain pipes are properly tied into the city's sewer system. The company pours colored chemical through the pipes and collects an inspection sample from each outlet, which is then analyzed. Each job should take 15 hours for each of four inspectors, who are paid $18 per hour. Each job uses 5 gallons of Brita (a colored chemical), which should cost $25 per gallon. Data from the company's most recent job (a building) follow:
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5 men worked a total of 80 hours and were paid $1750 per hour
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$1,400.00
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55 gallons of Brite were used and cost $2750 per gallon
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$151.25
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Total cost of the job
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$1,551.25
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Required:
Compute the following variances, using the formulas on page 386:
1. Materials price and quantity variances.
2. Labor rate and efficiency variances.