You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the finance department. This company is known for its rigorous case-based interview process. One of the students who successfully obtained a job with them upon graduation last year advised you to "know your variances cold!" When you inquired further, she told you that she had been asked to pretend that she was investigating wage and materials variances. Per her advice, you have been studying the causes and consequences of variances. You are excited when you walk in and find that the first case deals with variance analysis. You are given the following data for May for a detergent bottling plant located in Mexico:

Data Table

Actual
Bottles filled	300,000
Direct materials used in production	6,050,000	oz.
Actual direct material cost	2,208,250	pesos
Actual direct manufacturing labor-hours	22,040	hours
Actual direct labor cost	666,710	pesos
Standards
Purchase price of direct materials	0.36	pesos/oz
Bottle size	15	oz.
Wage rate	29.15	pesos/hour
Bottles per minute	0.50

Requirements

Please respond to the following questions as if you were in an interview situation:

1.

Calculate the materials efficiency and price variance, and the wage and labor efficiency variances for the month of May.

2.

You are given the following context: "Union organizers are targeting our detergent bottling plant in Puebla, Mexico, for a union." Can you provide a better explanation for the variances that you have calculated on the basis of this information?

Requirement 1. Calculate the materials efficiency and price variance, and the wage and labor efficiency variances for the month of May.

In order to calculate the variances complete the following table. (Round your final answer to the nearest whole number.)

		Actual input qty
	Actual costs	x
	incurred	Budgeted price	Flexible budget
Direct materials

Direct labor

Now compute the variances and label each amount as favorable (F) or unfavorable (U).

The materials efficiency variance is

The materials price variance is

The labor efficiency variance is

The labor price variance is

Requirement 2. You are given the following context: "Union organizers are targeting our detergent bottling plant in Puebla, Mexico, for a union." Can you provide a better explanation for the variances that you have calculated on the basis of this information?

If union organizers are targeting our plant, it could suggest employee

dissatisfaction

satisfaction

with our wage and benefits policies. During this time of targeting, we might expect employees to work

faster

more slowly

and they may be

less careful

more careful

with the materials that they are using. We should expect

favorable efficiency

favorable price

unfavorable efficiency

unfavorable price

variances for both wages and materials. We may see

a favorable

an unfavorable

wage variance, if we need to pay overtime due to work slowdowns. We do, in fact, see a substantial

favorable

unfavorable

materials quantity variance, representing a

high level of productivity

high level of unproductivity

serious conservation of materials

serious misuse of materials

. Similarly, we see

less

more

hours used than we expect to make this number of bottles. It is plausible that this

conservation and productivity

waste and inefficiency

are either caused by, or are reflective of the reasons behind the attempt to organize the union at this plant.