RM manufactures baseball caps. The Accounting Faculty of PSU order 150 caps for the Accounting 211 students with ALOE imprinted on them. RM has the following set of standards for the manufacture of baseball caps.
DM: ½ yard of fabric per cap
$4.00 per yard of fabric
DL: 1 labor hour per cap
$11.00 per labor hour
After the caps were shipped, RM analyzed the actual data from production and discovered the following results.
DM: ¾ yard of fabric per cap
$2.85 per yard of fabric
DL: 1.4 labor hours per cap
$9.50 per labor hour
1. Determine the DM and DL budgets.
2. Calculate the Quantity and Price Variances for each budget and indicate whether each is favorable or unfavorable.
3. Provide explanations for the variances.