Reference no: EM132502049

Point 1: Maxime S.A. is a small company that processes wild mushrooms found in the forests of central France. For many years, Maxime's products have had strong sales in France. However, companies from other countries in Europe, such as Italy and Spain, have begun marketing similar products in France, and price competition has become intense. Jean Gauthier, the company's controller, is planning to implement a standard costing system for Maxime and has gathered considerable information from the purchasing and production managers concerning production and material requirements for Maxime's products. Gauthier believes that the use of standard costing will allow Maxime to improve cost control and thereby better compete with the new entrants into the French market. Maxime's most popular product is dried chanterelle mushrooms, which are sold in small vacuumpacked jars.

Point 2: Each jar contains 15 grams of dried mushrooms. Fresh mushrooms are purchased for €60 per kilogram in bulk from individuals who gather them from local forests. (€ stands for euro, the currency used in France.) Because of imperfections in the mushrooms and normal spoilage, one-quarter of the fresh mushrooms are discarded. Fifteen minutes is the direct labour time required for inspecting and sorting per kilogram of fresh mushrooms. After sorting and inspecting, the acceptable mushrooms are flash-dried, which requires 10 minutes of direct labour time per kilogram of acceptable, sorted, and inspected fresh mushrooms. The flash-drying removes most of the moisture content of the mushrooms and therefore reduces the weight of the acceptable mushrooms by 80%. As a consequence, a kilogram of acceptable fresh mushrooms yields only about 150 grams of dried mushrooms. After drying, the mushrooms are vacuumpacked in small jars and labels are applied. Direct labour is paid at a rate of €12 per hour. The cost of the glass jars, lids, and labels is €10 per 100 jars. The labour time required to pack 100 jars is 10 minutes.

Required:

Question 1. Develop the standard cost for the direct labour and materials cost components of a single jar of dried chanterelle mushrooms, including the costs of the mushrooms, inspecting and sorting, drying, and packing.

Question 2. Gauthier wonders who should be held responsible-the purchasing manager or the production manager-for the following:

a. The materials price variances for the chanterelle mushrooms. Explain.

b. The materials quantity variances for the chanterelle mushrooms. Explain.