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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