Question

IMHO Products Co. manufactures a variety of products made of plastic and aluminum components. During the winter months, substantially all of the production capacity is devoted to the production of lawn sprinklers for the following spring and summer seasons. Other products are manufactured during the remainder of the year.
The company has developed standard costs for its several products. Standard costs for each year are set in the preceding October. The standard cost of a sprinkler for the current year is $3.70, computed as follows:
Direct materials: Aluminum­0.2 lb @ $0.40 per lb . . . . . . . . . . . . . . . . . . . . . $0.08
Plastic­1.0 lb @ $0.38 per lb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 0.38
Production labor­0.3 hr @ $8.00 per hr . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2.40
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.84
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.70
During February, IMHO Products manufactured 8,500 good sprinklers. The company incurred the following costs, which it charged to production:
Materials requisitioned for production:
Aluminum­1,900 lb @ $0.40 per lb . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 760
Plastic-Regular grade­6,000 lb @ $0.38 per lb . . . . . . . . . . . . . . . . . 2,280
Low grade­3,500 lb @ $0.38 per lb . . . . . . . . . . . . . . . . . . . . . . . . . . 1,330
Production labor­2,700 hr @ $8.60 per hr . . . . . . . . . . . . . . . . . . . . . . 23,220
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,140
Costs charged to production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,730
Materials price variations are not determined by usage but are charged to a materials price variation account at the time the invoice is entered. All materials are carried in inventory at standard prices. Materials purchases for February were as follows:
Aluminum­1,800 lb @ $0.48 per lb . . . . . . . . . . . . . . . . . . . . . .... $ 864
Plastic-Regular grade­3,000 lb @ $0.50 per lb . . . . . . . . . . . . . . . . . . 1,500
Low grade* ­6,000 lb @ $0.29 per lb . . . . . . . . . . . . . . . . . . . . . . . . . 1,740
*Due to plastic shortages, the company was forced to purchase lower grade plastic than called for in the standards. This increased the number of sprinklers rejected on inspection.

Required:
Calculate price and usage variances for each type of material and for labor, using the formulas on pages 402 and 403.



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  • CreatedMay 05, 2014
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