Maurice Tutor
$15/per page/Negotiable
VitalAid Inc. manufactures a vacuum-sealed high-protein food supplement that it sells to food aid organizations around the world. The company uses variable costing in conjunction with a standard costing system and has established the following standards for one package of VitalAid bars:
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During October, the company recorded the following activity relative to production of VitalAid:
a.      The company produced 4,000 packages during October.
b.      A total of 1,800 kilograms of material was purchased at a cost of $19,800.
c.      There was no beginning inventory of materials; however, at the end of the month, 300 kilograms of material remained in ending inventory.
d.      The company employs 5 people to work on the production of VitalAid. During October, each employee worked an average of 185 hours at an average rate of $14.00 per hour.
e.      Variable manufacturing overhead is assigned to VitalAid on the basis of direct labour- hours. Variable manufacturing overhead costs during October totalled $1,850.
The company’s management is anxious to determine the efficiency of the VitalAid pro- duction activities.
Required:
1.             a.      Compute the price and quantity variances for direct materials used in the produc- tion of VitalAid.
b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the con- tract? Explain.
2.             a.      Compute the rate and efficiency variances for labour employed in the production of VitalAid.
b. In the past, the 5 people employed in the production of VitalAid consisted of 3 senior workers and 2 assistants. During October, the company experimented with 4 senior workers and 1 assistant. Would you recommend that the new labour mix be contin- ued? Explain.
3.             Compute the variable overhead spending and efficiency variances. What relationship can you see between this efficiency variance and the labour efficiency variance?
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