Reference no: EM133006513

Benoit Wines uses a standard costing system and has established the following standards for the prime costs for its Merlot by the litre:

                                                                                              Standard cost                        Standard cost

                                                Standard quantity                      per unit                               per litre

Direct                                       1.75 kg of grapes              $2.31/kg                   $4.0425 ingredients

Direct labour                              0.25 direct labour hours           $16.00/DLH                    $4.00

During August, Benoit purchased 430.000 kilograms of direct materials at a total cost of $961500 from a new supplier. The total factorialr wages for August were $1,030,000, 90% of which was for direct labour. Benoit manufactured 245,000 litres of Merlot during August using €3,500 hours of direct labour and 423.750 kilograms of direct materials.

Required:

Problem a) Calculate the direct materials purchase price and direct materials quantity variances for August.

Problem b) Calculate the direct labour rate and efficiency variance for August.

Problem c) Comment on the above variances from the perspective of the purchasing manager and the production manager.