DEF operates several US manufacturing facilities, one of which produces only storage jars. The standard cost sheet for these jars calls for the following:

0.5 pound of glass @ $0.12/pound

1 lid assembly @ $0.18/assembly

0.01 direct labor hour @ $15/hour

During the month of November, DEF produced 1,000,000 jars, which is a new production record. November production consumed 540,000 pounds of glass at a total cost of $75,600 and 1,001,000 lid assemblies at a total cost of $160,160. The production used 9,500 direct labor hours at a total cost of $144,875.

Required:

a. Show calculations for the direct materials price variance and the direct materials quantity variance for EACH material.

b. Show calculations for the direct labor rate variance and the direct labor efficiency variance.

c. DEF will investigate any variance that is more than 5% above or below the standard. Briefly explain in your own words why the company does not investigate every variance and speculate on why they have set 5% as their threshold for investigation.

Answer rating: 100% (QA)

Answer Explanation C i Most companies will set a predetermined standard for variance allowable and a... View the full answer