Saskatchewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.
Direct labor: Direct material:
Quantity, .25 hour Quantity, 4 kilograms
Rate, $16 per hour Price, $.80 per kilogram
Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:
Direct labor: $211,900 for 13,000 hours
Direct materials: $170,100 for 210,000 kilograms
1. Compute the direct-material quantity variance and determine whether it is favorable or unfavorable.
2. Compute the direct-labor rate variance and indicate whether it is favorable or unfavorable.
3. Calculate the direct labor efficiency variance and indicate whether it is favorable or unfavorable.
This solution provides computations in Excel for direct-material quantity, direct-labor rate variance, and direct labor efficiency variance.