Gloria’s a food manufacturer is trying to make an assessment of its operations for the past year. The entity operates a standard marginal costing system and manufactures one product, the blaster for which the following standard revenue and cost data per unit of product is available: Selling price $24.00 Direct material A 2.5 kg at $3.40 per kg Direct material B 1.5 kg at $2.40 per kg Direct labor 0.45 hrs. at $12.00 per hour, Actual data for the twelve-month period was as follows: Sales and production 48,000 units of the blaster were produced and sold for $1,161,600 Direct material A 121,950 kg were used at a cost of $402,435 Direct material B 67,200 kg were used at a cost of $168,000 Direct labor Employees worked for 18,900 hours, but 19,200 hours were paid at a cost of $234,240 Budgeted sales for the period were 50,000 units of Product Blaster. A recession last year meant that the market for the product declined by 5%. 

Required: 

(a) Calculate the following variances. 

(i) Sales volume variance. 

(ii) Planning and operational variances for sales volume. 

(iii) Price, mix and yield variances for each material. 

(b) Suggest two possible explanations for the material price and yield variances calculated in part (a).

Answer rating: 100% (QA)

a i The sales volume variance is unfavorable meaning that fewer units were sold than were planned Th... View the full answer