WATERWAYS CONTINUING PROBLEM

Chapter $25$

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$($This is a continuation of the Waterways Problem from Chapters $19$ through $24.)$

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WCP$25$ Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not $$ideal$$ at this point, but the management is working toward that as a goal. At present, the company uses the following standards.

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Materials

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Item

Per Unit

Cost

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Metal

$1$ lb$.$

$58$ per lb$.$

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Plastic

$12$ oz$.$

$96$ per lb$.$

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Rubber

$4$ oz$.$

$80$ per lb$.$

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Direct Labor

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Item

Per Unit

Cost

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Labor

$12$ min.

$$8\mathrm{.}00$ per hr$.$

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Predetermined overhead rate based on direct labor hours $=$ $$4\mathrm{.}28$

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The January figures for purchasing, production, and labor are:

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The company purchased $229,000$ pounds of raw materials in January at a cost of

$74$ a pound.

Production used $229,000$ pounds of raw materials to make $115,500$ units in January.

Direct labor spent $15$ minutes on each product at a cost of $$7\mathrm{.}75$ per hour.

Overhead costs for January totaled $$54,673$ variable and $$63,800$ fixed.

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Instructions

Answer the following questions about standard costs.

$($a$)$ What is the materials price variance?

$($b$)$ What is the materials quantity variance?

$($c$)$ What is the total materials variance?

$($d$)$ What is the labor price variance?

$($e$)$ What is the labor quantity variance?

$($f$)$ What is the total labor variance?

$($g$)$ What is the total overhead variance?

$($h$)$ Evaluate the variances for this company for January. What do these variances suggest to management?