Berlisle Inc. is a manufacturer of sails for small boats. The management is trying to get a better understanding of their costs and are concerned with the variances that they have seen between budgets and actual results. The budget is prepared each November at Berlisle and standards are updated at that time, which stay in use for the next year. A new quality initiative launched by management resulted in Berlisle deciding to go to a new supplier to attain the material they are using in production, and recent political changes have resulted in new tariffs of $0.20 per meter. This is the first month that the tariffs have come into effect. Labour costs seem to be too high, and the company is considering replacing some of the more senior workers with younger workers and part-time workers that they feel they could pay less money to. The following information is available for Berlisle Inc for the month of March. During the month, 12,000 good units of product were produced: Standard: (budgeted expected usage per unit developed in the prior year) Material: 7.0 meters per unit at $8.00 per meter Labour: 1.8 hours per unit at $24.00 per hour Actual usage for March 2019 Material purchases: 85,000 meters at $8.35 per meter (landed cost) Material used: 81,500 meters Direct labour: 20,700 hours at $25.30 per hour What is the material price and quantity variance? Is it favourable or unfavourable.[3 marks] What is the labour rate and usage variance? Is it favourable or unfavourable. [3 marks] Based on your analysis, what recommendations would you make to the management of Berlisle? [3 marks].

1. Berlisle Inc. is a manufacturer of sails for small boats. The management is trying to get a better
understanding of their costs and are concerned with the variances that they have seen between
budgets and actual results. The budget is prepared each November at Berlisle and standards are
updated at that time, which stay in use for the next year.
A new quality initiative launched by management resulted in Berlisle deciding to go to a new
supplier to attain the material they are using in production, and recent political changes have
resulted in new tariffs of $0.20 per meter. This is the first month that the tariffs have come into
effect. Labour costs seem to be too high, and the company is considering replacing some of the
more senior workers with younger workers and part-time workers that they feel they could pay
less money to. The following information is available for Berlisle Inc for the month of March.
During the month, 12,000 good units of product were produced:
Standard: (budgeted expected usage per unit developed in the prior year)
Material: 7.0 meters per unit at $8.00 per meter
Labour: 1.8 hours per unit at $24.00 per hour
Actual usage for March 2019
Material purchases: 85,000 meters at $8.35 per meter (landed cost)
Material used: 81,500 meters
Direct labour: 20,700 hours at $25.30 per hour
What is the material price and quantity variance? Is it favourable or unfavourable.[3 marks]
What is the labour rate and usage variance? Is it favourable or unfavourable. [3 marks]
Based on your analysis, what recommendations would you make to the management of Berlisle?
[3 marks]