Dundas Company manufactures and sells two special purpose cleaning solvents Brill
Dundas Company manufactures and sells two special-purpose cleaning solvents, Brill and Daz. The two products emerge from the same production process, which requires three materials: C12, D24, and E48. The division developed standard costs for these two solvents as shown below:
Normal monthly volume is 22,000 kilograms of input materials processed or 20,000 kilograms of good output. Some variations of input quantities are permissible without affecting the quality of the finished products.
Materials are purchased from another division and are readily available; therefore, very little raw materials inventory is kept by Dundas Company. Materials prices are negotiated annually between the divisions. All production is finished daily; therefore, there are no work in process inventories. Actual production of good output in July amounted to 22,800 kilograms. The production costs were calculated as follows:
Calculate the materials and labour cost variances in as much detail as the data permit for the Dundas Company for the month of July. Comment on the performance of the production function of the Dundas Company during July by explaining the significance of the variances you calculated.
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