Question

E11-22A (similar to) Question Help The Garver Restaurant Group manufactures the bags of frozen French fries used at its franchised restaurants. Last​ week, Garver's purchased and used 103,000 pounds of potatoes at a price of $0.85 per pound. During the​ week, 1,700 direct labor hours were incurred in the plant at a rate of $12.35 per hour. The standard price per pound of potatoes is $1.00​, and the standard direct labor rate is $12.05 per hour. Standards indicate that for the number of bags of frozen fries​ produced, the factory should have used 101,000 pounds of potatoes and 1,400 hours of direct labor. Read the requirementsLOADING.... Requirement 1. Determine the direct material price and quantity variances. Be sure to label each variance as favorable or unfavorable. ​(Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable​ (F) or unfavorable​ (U). Abbreviations​ used: DM​ = Direct​ materials.) Begin by determining the formula for the price​ variance, then compute the price variance for direct materials.

Answer 1

Answer:

Please see answer below

Explanation:

This is an incomplete question. However, other parts of the question have been added as extracted .

1. Determine the direct material price and quantity variances

Direct material price variance

= (Actual price - Standard price) × Purchase quantity

= ($0.85 - $1) × 103,000

= $15,450 Favorable

Direct material quantity variance

= (Actual quantity - Standard quantity) × Standard price

= (103,000 - 101,000) × $1

= $2,000 Unfavorable

2. Think of a plausible explanation for the variances found in requirement 1.

°For direct material price variance, the possible reasons for the variance are shortage of raw materials, discount application etc. However, variance was favorable because the direct material was purchased for lesser amount compared to the standard price.

°For direct material quantity variance, possible causes of variance are low quality of raw materials, incorrect specification of raw materials, damage during production processes. However, the variance was unfavorable because

the actual quantity used is more than the standard quantity that ought to have been used.

3. Determine the direct labor rate and efficiency variance

Direct labour rate variance

= (Actual rate - Standard rate) × Actual hours worked

= ($12.35 - $12.05) × 1,700

= $510 Unfavorable

Direct labor efficiency variance

= (Actual hours worked - Standard hours worked) × Standard rate

= (1,700 - 1,400) × $12.05

= $3,615 Unfavorable

4. Could the explanation for the labor variances be tied to material variances.

No. The total labor variance could be as a result of money paid to laborers which be could be lower or higher than the standard rate and using either less or more direct labor hours than expected.