Pecos Pecan Pads makes pressed pecan wood covers to prevent weed growth. During July 2009, the company produced and sold 44,000 rolls and recorded the following cost data:

Requirements 

1. Compute the price and efficiency variances for direct materials and direct labor.

2. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance.

3. Prepare a standard cost income statement through gross profit to report all variances to management. Sale price was \(\$ 10.60\) per roll.

4. Pecos intentionally purchased cheaper materials during July. Was the decision wise? Discuss the trade-off between the two materials variances. 

Transcribed Image Text:

Direct materials Direct labor STANDARD COST INFORMATION: Quantity 3 lbs. Price $1.10 per lb. 0.10 hours $9.00 per hour 0.10 hours $18.00 per hour Variable manufacturing overhead Fixed manufacturing overhead ($96,000 for static budget volume of 40,000 units and 4,000 hours, or $24 per hour)