Question

Requirement 2. Discuss some possible causes of the variances you have calculated. Can you make any possible connection between the material and labor​ variances? What recommendations do you have for future​ improvement? The materials price and efficiency variances could be an indication that the company purchased ▼ less more expensive ingredients of ▼ higher lower ​quality, which resulted in ▼ fewer more than the standard number of rejected units. The labor price variance suggests that ▼ less more experienced workers may have worked​ more, resuting in a ▼ faster slower work pace and a ▼ higher lower than normal amount of rejects or waste.

Answer 1

Complete Questions:

Possible causes for price and efficiency variances. You have been invited to interview for an internship with an international food manufacturing company. When you arrive for the interview, you are given the following information related to a fictitious Belgian chocolatier for the month of June. The choco- latier manufactures truffles in 12-piece boxes. The production is labor intensive, and the delicate nature of the chocolate requires a high degree of skill.

Actual                                                                                                                            

Boxes produced                                                   10,000

Direct materials used in production                    2,150,000 g

Actual direct material cost                                    60,200 euro

Actual direct manufacturing labor-hours             1,100  

Actual direct manufacturing labor cost                12,650 euro

Standards                                                                                                                                  

Purchase price of direct materials                         0.03 euro/g

Materials per box                                                    200 g

Wage rate                                                                12 euro/hour

Boxes per hour                                                        10

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

1. Calculate the materials efficiency and price variance and the wage and labor efficiency variances for the month of June.

2. Discuss some possible causes of the variances you have calculated. Can you make any possible connection between the material and labor variances? What recommendations do you have for future improvement?

Answer:

                10000          

                                         Standard     Actual at Standard Actual

Quantity/Hour Per Unit Rate Value Quantity/Hour Rate Value Quantity/Hour Rate Value

Direct Material 200  0.03 6 2000000 0.03 60000 2150000 0.028 60200

Direct Labor 0.1  12 1.2 1000 12 12000 1100 11.50 12650

Total       72000   72850

1    

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