The Kohler Chemical Manufacturing Company produces two primary chemical products to be used as base ingredients for a variety of products. The 2012 budget for the two products (in thousands) was as follows:

The following planning assumptions were used for the budget: (1) a direct materials yield of 96%, and (2) a direct labour rate of $6 per hour. The actual results for 2012 were as follows (in thousands):

The actual production yield was 95% for LX-4 and 94% for ABC-8. Th e direct labour cost per hour for both products was $6.50.
Instructions
(a) Calculate for product LX-4: (1) the direct materials price variance, and (2) the direct materials efficiency (yield) variance.
(b) Calculate for product ABC-8: (1) the direct labour rate variance, and (2) the direct labour efficiency variance.

Transcribed Image Text:

Total Level of production in litres Direct materials Direct labour Total direct manufacturing cost LX-4 1,800 $4,500 2,700 $7,200 ABC-8 1,800 $5,625 2,700 $8,325 3,600 $10,125 5,400 $15,525 Total litres produced Direct materials Direct labour Total direct manufacturing cost 1,710 $4,104.00 1,974 $6,415.50 3,276.00 3,684 $10,519.50 6,084.00 $16,603.50