Financial and Managerial Accounting: P20-47 Claro Company produces plastic bottles
Cornerstone of Financial and Managerial Accounting P20-47 Standard Costing Claro Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established: Direct materials (5lbs @ $0.90) 4.50 Direct labor (1.5 hours @ $14.00) 21.00 Standard Prime Cost 25.50 During December, 78,000 pounds of material were purchased and used in production. There were 15,000 cases produced, with the following actual prime costs: Direct materials 74,000 Direct labor 315,000 (for 22,500 hours)
Required: 1. Compute the materials variances. 2. Compute the labor variances. 3. What are the advantages and disadvantages that can result from the use of a standard costing system?