Prepare Direct materials Price Variance Efficiency varianceLabor rate variance Labor Efficiency Variance and pass necessary comments.
Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has established the following standards for one unit of Fruta:
|
Standard Quantity
|
Standard Price or Rate
|
Standard Cost
|
|
Direct materials
|
1.5
|
pounds
|
$6.00
|
per pound
|
$9.00
|
|
Direct Labor
|
0.6
|
hours
|
$12.00
|
per hour
|
7.20
|
|
Variable manufacturing overhead
|
0.6
|
hours
|
$2.503
|
per hour
|
1.50
|
|
|
|
|
|
$17.70
|
During June, the company recorded this activity relative to production of Fruta:
a. The company produced 3,000 units during June.
b. A total of 8,000 pounds of material were purchased at a cost of $46,000.
c. There was a no beginnign inventory of materials; however, at the end of the month, 2,000 pounds of material remainded in ending inventory.
d. The company employs 10 persons to work on the production of Fruta. During June, each worked an average of 160 hours at an average rate of $12.50 per hour.
e. Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable manufacturing overhead costs during June totaled $3,600.
The company's management is anxious to determine the efficeincy of the Fruta production activities.
For direct materials used in the production of Fruta:
In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? Explain.