Cherokee, Inc. manufactures one product called tybos

Cherokee, Inc. manufactures one product called tybos. The company uses a standard cost system and sells each tybo for $8. At the start of monthly production, Cherokee estimated 9,500 tybos would be produced in March. Cherokee has established the following material and labor standards to produce one tybo:

Standard Quantity         Standard Price

Direct materials              2.5 pounds                 $3 per pound

Direct labor                      0.6 hours                  $10 per hour

During March 2013, the following activity was recorded by the company relating to the production of tybos:

1.   The company produced 9,000 units during the month.

2.   A total of 24,000 pounds of materials were purchased at a cost of $66,000.

3.   A total of 24,000 pounds of materials were used in production.

4.   5,000 hours of labor were incurred during the month at a total wage cost of $55,000.

Instructions

Calculate the following variances for March for Cherokee, Inc.

(a)   Materials price variance

(b)   Materials quantity variance

(c)   Labor price variance

(d)   Labor quantity variance

Here’s the SOLUTION

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