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    Possible causes for price and efficiency variances

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    You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the Finance Department. This company is known for its rigorous case-based interview process. One of the students who successfully obtained a job with them upon graduation last year advised you to "know your variance cold" When you inquired further, she told you that she had been asked to pretend that she was investigating wage and materials variances. Per her advice, you have been studying the causes and consequences of variances. You are excited when you wak in and find that the first case deals with variance analysis. you are given the following data for May for the detergent bottling plant located in Mexico:

    Bottles filled - 360,000
    diret materials used in production - 6,000,000ozs
    Actual direct material cost - 2,125,000 pesos
    Actual direct manufacturing labor-hours - 22,040 hours
    Actual direct labor cost - 664,940 pesos

    Purchase price of direct materials - .35 pesos/oz
    Bottle size - 15oz
    Wage rate - 29.30 pesos/hour
    Bottle per minute - .50

    Please respond to the following questions as if you were in an interiew situation:

    1) Calculate the materials efficiency and price variance, and the wage and labor efficiency variances for the month of May.

    2) You are given the following context: "Union organizers are targeting our detergent bottling plant in Puebla, Mexico for a union. Can you provide a better explanation for the variances that you have calculated on the basis of this information?

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    Solution Summary

    In this solution, which is provided in an Excel document, calculations for materials efficiency and price variance, as well as wage and labor efficiency variances are given.