ABC company is a toy manufacturing firm. It estimates that it will produce 20,000 toy...
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ABC company is a toy manufacturing firm. It estimates that it will produce 20,000 toy trucks during the coming year that will each use .025 gallons of paint at $30 per gallon. ABC company purchased 500 gallons but only used 490 gallons to actually produce 24,500 toy trucks. The total price for the paint was $17,000. In addition, the company expects each truck to use 1.5 hours of labor at a cost of $7.00 per hour. However, at the end of the year, it was determined that a total of 37,975 hours were used at a cost of $6.80 per hour. Please show work.
a.) Find the following variances: direct materials price variance, direct materials usage variance, overall direct materials variance, direct labor rate variance, direct labor efficiency variance, and overall direct labor variance.
b.) Management implemented a new strategy with respect to inputs. The new strategy involved a decision to invest in higher quality inputs. Evaluate managements strategy.
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