Hansenko Company Manufactures 100-Kilogram Bags of Fertilizer That Have the Following

Essay

Hansenko Company manufactures 100-kilogram bags of fertilizer that have the following unit standard costs for direct materials and direct labour:
$\begin{array}{lr}\text { Direct materials }(100 \mathrm{~kg} @ \$ 1.00 \text { per kg) } & \$ 100.00 \\\text { Direct labour }(0.5 \text { hours at } \$ 24 \text { per hour) } & \underline{12.00} \\\text { Total standard direct cost per } 100 \mathrm{~kg} \text { bag } & \underline{\$ 112.00}\end{array}$
The following activities were recorded for October:
- 1,000 bags were manufactured.
- $95,000 \mathrm{~kg}$ of materials costing $\$ 76,000$ were purchased
- $102,500 \mathrm{~kg}$ of materials were used.
- $\$ 12,000$ was paid for 475 hours of direct labour. There were no beginning or ending work-in-process inventories.
a.Compute the direct materials variances.
b.Compute the direct labour variances.
c.Give possible reasons for the occurrence of each of the preceding variances.