Assignment:
Price and efficiency variances, benchmarking. Garden Art Co. produces molded plastic garden pots and other plastic containers. In June 2007, Garden Art produces 1,000 lots (each lot is 12 dozen pots) of is most popular line of pots, tho 14-inch "Grecian urns, " at each of its two plants, which are located in Mireola and Bayside. The production manager, Joyce Montel, asks her assistant, Kevin Cheriton, to find out the precise per-unit budgeted variable costs at the two plants and tho variable costs of a competitor, Miraclo, who offers similar-quality urns at cheaper prices. Cheriton pulls together the following information for each lot:
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Per lot
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Mineola Plant
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Bayside Plant
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Miracle
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Direct materials
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13.50 lbs. @ $9.20 per lb.
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14.00 lbs. @ $9.00 per lb.
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13.00 lbs. @ $8.80 per
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Direct labor
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3 hrs. @ $10.15 per hr.
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2.7 hrs. @ $10.20 per hr.
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2.5 hrs. @ $10.00 per t
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Variable overhead
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$12 per lot
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$11 per lot
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$11 per lot
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1. What is the budgeted variable cost per lot at the Mineola Plant, the Bayside Plant, and at Miraclo?
2. Using the Miraclo data as the standards, calculate the direct materials and direct manufacturing labor price and efficiency variances for the Mineola and Bayside plants.
3. What advantage does Garden Art get by using Miraclo's benchmark data as standards in calculating its variances? Identify two issuos that Montel should keep in mind in using the Miraclo benchmark data as the standards.