Question

The production accountant for Children’s Car ManufacturersLtd.(CCM) is looking at itsproduction costs. Recently, CCM changed its supplier for direct materials to ensure thatit was using high-quality components. In addition to this change, CCM hired more skilledlabourers to decrease the likelihood of defects in the completed toy cars for children

.The following information has been compiled for creating a variance analysis at CCM’sDecember 31, 2019, year end:

CCM paid $12,600,000 in direct labour costs for 2019 relating to 325,000directlabour hours. The budget for direct labour was 110 hours per car at a rate of $36 per

hour.Actual usage shows 370,000 direct materials were purchased for $225 each and3,095 cars were produced.There wereNO direct materials left in inventory at

December 31, 2019. CCM budgeted the use of 112 direct materials for each car with a standard price of $231 per direct material and production of 3,150 cars.

Required:

a)Calculate the direct materials price and quantity variances.

b)Calculate the direct labour rate and efficiency variances.

Answer 1