Camping Out Co. manufactures down sleeping bags. Each sleeping bag requires 4 pounds of down and takes .3 hours of direct labor. The standard cost of the down used by Camping Out is $8 per pound and the standard labor cost is $10 per hour. In November, Camping Out purchased 15,000 pounds of down for $120,750. During the year, the company manufactured 4,000 sleeping bags. Payroll reported a total of 1,480 direct labor hours at a cost of $14,060.
a. Compute the materials price and quantity variances and indicate whether the variances are favorable or unfavorable.
b. Compute the labor price and quantity variances and indicate whether the variances are favorable or unfavorable.
The solution computes materials, labor price and quantity variances.