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Lindsey Manufacturing Company: Reasons for Variances...

During February the Lindsey Manufacturing Company's costing system reported several variances that the production manager was surprised to see. Most of the company's monthly variances are under $125, even though they may be either favorable or unfavorable. The following information is for the manufacture of garden gates, its only product:

(1) Direct materials price variance, $800 unfavorable.
(2) Direct materials efficiency variance, $1,800 favorable.
(3) Direct manufacturing labor price variance, $4,000 favorable.
(4) Direct manufacturing labor efficiency variance, $600 unfavorable.

Provide the manager with some ideas as to what may have caused the efficiency variances.

Solution Preview

(1) Direct materials price variance, $800 unfavorable.
An unfavorable price variance results from buying at higher than standard. Causes of a large unfavorable variance may be from a shortage of materials causing a price spike (like an early frost killing all the orange crops and causing orange juice prices to spike). Another causes might be seasonality in the available of ingredients (cheap during harvest and expensive when out of season).
(2) Direct materials efficiency variance, $1,800 favorable.
A favorable materials efficiency variance comes from using less material or wasting less material than the standard permits. Causes might include workers ...

Solution Summary

Your tutorial is 350 words and explains two or more events that could cause each variance. Then, the discussion gives an example of an event that could cause both the material variances and an event that could cause both labor variances.

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