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In: Accounting

The Hornsby company has just started a business producing a cleaning compound ,Cleanfast . The direct...

The Hornsby company has just started a business producing a cleaning compound ,Cleanfast . The direct materials and direct labour standards for one unit of Cleanfast are given below:
Standard Quantity/Hours Standard Price/Rate
Direct materials 4.6 pounds $2.40 per pound
Direct labour 0.2 hours $18.00 per hour

During a recent month the following activity was recorded :
(i) Twenty thousand of material were purchased at a cost of $46,400 .
(ii) Nineteen thousand pounds were used to produce 4,000 units of Cleanfast.
(iii) 750 hours of direct labour time were recorded at a total labour cost
of $14,925.

Required:
1.Compute the material price and quantity variances for the month .
2.Compute the labour rate and efficiency variances for the month .
3. Why has the company calculated standard prices?
4.Provide two reasons for both the Material price variance and the Labour efficiency variance.

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