KARE KARE JOOZ, Inc., one of the segments of STORM ARMADA Company manufactures a single product in which variable manufacturing overhead is assigned on the basis of direct labor hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard Standard Price Standard Quantity or Rate Cost P 3.00 per Direct materials… 1.5 pounds pound P 4.50 Direct labor…… 0.6 hours P6.00 per hour P 3.60 Variable manufacturing overhead 0.6 hours P 1.25 per hour P0.75 During March, the following activity was recorded by the company: • The company produced 3.000 units during the month. • A total of 8,000 pounds of material were purchased at a cost of P 23.000. • There was no beginning inventory of materials on hand to start the month: at the end of the month, 2.000 pounds of material remained in the warehouse. During March, 1600 direct labor hours were worked at a rate of P 6.50 per hour • Variable manufacturing overhead costs during March totaled P 1.800. Below are the following variance materials price variance P 1.000 Favorable materials quantity variance 4.500 Unfavorable labor rate variance 800 Unfavorable labor efficiency variance 1.200 Favorable variable overhead spending 200 Favorable variance variable overhead efficiency 250 favorable variance In addition to the above information are the following information related to its operation: This year Last year Difference Sales 155,000.00 130,000.00 25,000.00 Cost of goods sold 120,000.00 110.000.00 10.000.00 Difference 35,000.00 20.000.00 15.000.00 Selling Price Cost Price Quantity 4.00 5.17 30000 This year 5.20 4.40 Last year 25000 0.03 0.40 5.000.00 Difference 35.000 nice Sales Price Variance Cost Price Variance Sales Quantity Variance Cost Quantity variance 1,000.00 Unfavorable 12,000.00 Favorable 2.6000.00 Favorable 22,000.00 Unfavorable PART IV What could these variances indicate? Evaluate the performance of Kore Kare Jooz by using the above information.
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