EXERCISE 10–8 Material and Labour Variances [LO2, LO3]
Camping Supply Company has developed a new camping lamp that runs on solar power. The solar cells charge in the sun all day and then the lamp is ready to run when the sun goes
Direct materials: 3 small solar cells per lamp at $0.60 per cell Direct labour: 0.75 hours per lamp at $12 per hour down. The company has a standard costing system to help control costs and has established the following standards related to the new camping lamp:
During March, the company produced 4,000 camping lights. Production data for March are as follows:
1. Compute the following variances for March:
a. Direct materials price and quantity variances.
b. Direct labour rate and efficiency variances.
2. Prepare a brief explanation of the possible causes of each variance.