Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established:
During December, 78,000 pounds of materials were purchased and used in production. There were 15,000 cases produced, with the following actual prime costs:
Required:
1.
Calculate the value of material price variance and material usage variance.
Variance:
The amount obtained when actual cost is deducted from budgeted cost is known as variance. Variance is calculated to find whether the cost is over applied or under applied.
Use the following formula to calculate material price variance:
Substitute $74,000 for actual cost, 78,000 units for actual quantity and $0.95 for standard price in the above formula.
Therefore, the material price variance is $100(F).
Use the following formula to calculate material usage variance:
Substitute $0
2.
Calculate the value of labor rate variance and labor efficiency variance.
3.
Explain the advantages and disadvantages of the use of standard costing.
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