Reference no: EM132939739

Question - Solbor Enterprises maintains capacity to produce 68,000 pounds of its only product during any given year.

Solbor Enterprises purchased 65,500 pounds (cost = $602,600) of direct material to be used in the manufacture of the company's only product. According to the production specifications, each completed unit requires four pounds of direct material at a standard cost of $9 per pound.

Direct materials consumed by the end of the period totaled 65,500 pounds in the manufacture of 16,050 finished units.

An examination of Timber's payroll records revealed that the company worked 42,000 labor hours (cost = $621,600) during the period, and specifications called for each completed unit requiring 2.6 hours of labor at a standard cost of $15 per hour.

Assume that the company computes variances at the earliest point in time.

Required -

Calculate all direct material and direct labor variances.

Identify the most worrisome variance, from management's perspective, and speculate as to what may have caused it.