Reference no: EM13499003

The following information is to be used for the next three questions:

Downward Inc. manufactures and sells a product, Z30. The per unit standards for the direct costs of product Z30 are as follows:

• 2.8 kg of material at a cost of $12.50 per kg
• 0.60 direct labour hours at a direct labour rate of $35.00 per direct labour hour

During the year, Downward Inc. purchased and used 18,000 kg of material at a total cost of $193,500 to manufacture 5,000 units of Z30. This required 2,300 direct labour hours at a total cost of $87,400.

1.What is the price variance for direct materials?

a.$8,100 unfavourable

b.$4,500 unfavourable

c.$12,600 favourable

d.None of the above

2.The labour efficiency variance for the year is:

a.$6,900 favourable

b.$31,400 favourable

c.$17,600 favourable

d. $24,500 favourable

3.A customer asks Downward to bid for an order of 900 units of Z30. Downward applies manufacturing support costs at rate of 120% of the direct labour cost and applies a markup of 60% of direct costs. Assuming Downward does not know what the actual costs are going to be, Downward's bid for the total order would be:

a. $103,320

b.$116,928

c. $84,420

d.$98,028