Question: 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 (5 lbs. @ $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 hrs.)

Required: 1. Compute the materials variances.

2. Compute the labor variances.

3. Conceptual Connection: What are the advantages and disadvantages that can result from the use of a standard costing system?