Rhodes Corporation manufactures a product with the following standard costs: Standards are based on normal monthly production involving 2,000 direct labor hours (500 units of output).
The following information pertains to the month of July:
a.Compute the following variances for the month of July,indicating whether each variance is favorable or unfavorable:
(1)
Materials purchase price variance
(2)
Materials quantity variance
(3)
Labor rate variance
(4)
Labor efficiency variance
b.Give potential reasons for each of the variances.Be sure to consider inter-relationships among variances.

Question

Rhodes Corporation manufactures a product with the following standard costs:  Standards are based on normal monthly production involving 2,000 direct labor hours (500 units of output).
The following information pertains to the month of July:  
a.Compute the following variances for the month of July,indicating whether each variance is favorable or unfavorable:
(1)
Materials purchase price variance
(2)
Materials quantity variance
(3)
Labor rate variance
(4)
Labor efficiency variance
b.Give potential reasons for each of the variances.Be sure to consider inter-relationships among variances.

Quizplus · Accepted Answer

The Answer of Rhodes Corporation manufactures a product with the following standard costs:  Standards are based on normal monthly production involving 2,000 direct labor hours (500 units of output).
The following information pertains to the month of July:  
a.Compute the following variances for the month of July,indicating whether each variance is favorable or unfavorable:
(1)
Materials purchase price variance
(2)
Materials quantity variance
(3)
Labor rate variance
(4)
Labor efficiency variance
b.Give potential reasons for each of the variances.Be sure to consider inter-relationships among variances.

Rhodes Corporation Manufactures a Product with the Following Standard Costs