The management of the Hampshire Company would like to implement benchmarking. Standard costs have been established and are presented below. You will want to complete a variance analysis to include efficiency and price variances for materials (cloth and handle assemblies) and labor based on the following data:
Units Produced = 80,000
Units Sold = 60,000
Direct Materials Purchased and Used
Actual yards of cloth purchased and used: 128,000
Actual price incurred per yard: $1.25
Actual handles purchased and used: 80,808
Actual price per handle/rib/stretcher assembly: $0.99
Direct Manufacturing Labor Used
Actual direct labor hours used: 15,748
Actual price per hour: $7.62
Direct labor costs: $120,000
Standard labor hours per unit: 0.20
Standard labor price per hour: $7.50
Yards material per unit: 1.50
Standard price per yard: $1.15
Handle/rib/stretcher assembly per unit: 1
Standard price per handle assembly: $1.05
Companies can use variance analysis and benchmarking to measure performance within their own company and against competitors. This can be done by setting standards/budgets and comparing a completed variance analysis to results from prior periods or comparing them to competitors’ results. Using the information provided above, complete the following calculations (steps 1 and 2) in the Hampshire Company Spreadsheet. This will assist you in responding to all components of Section III.
1. Calculate price variances for material and labor and denote whether they are favorable or unfavorable.
2. Calculate efficiency variances for material and labor and denote whether they are favorable or unfavorable.
In order to measure performance and make use of the variance analysis completed, management understands the need to compare results with their competitors. Following the steps outlined below, you will research benchmarking and propose the most effective approach for your company. Respond to Parts A through C of Section III as outlined in the Final Project Guidelines and Rubric document.