Question

Question 27 At the end of June, the manager of the B.C. manufacturing plant was provided with the following variance analysis report. Favourable (F)/ Unfavourable (U) Budget 310,000 Actual 323,000 Variance 13,000 п Production in units Production costs: Direct material Direct labour Variable overhead costs Fixed overhead costs Total production costs $742,109 1,395,000 131,750 147,250 $2,416,109 $749,581 1,420,440 135,821 139,870 $2,445,712 $(7,472) (25,440) (4,071) 7,380 $(29,603) псс с The manager immediately called the production supervisor, demanding an explanation for the large unfavourable variance for the quarter. The production supervisor was puzzled. He thought the cost-cutting measures they had incorporated were beginning to work. He certainly wasn't expecting such a large discrepancy. The standard rates the plant was using with its normal costing system are summarized below. Volume Cost 1.40 kg per unit $1.70 per kg 0.25 hour per unit $18.00 per hour Direct material Direct labour Predetermined overhead rate: Variable 0.25 hour per unit 0.25 hour per unit $1.70 per hour $1.90 per hour Fixed

Answer 1

calculation at following production variances: i material price variance = (Actual - Standard Actual Quantity used Price price = ($1.90-$1.70) x 4401930kgs = $58,186 un favourable ü Material Quantity Variance actual usage in units Standard - usage in Standard cost perunit Enits Standard usage in units = 323,000x140kgs 1 unit - 1.40kg yrs 452,200kgs 323,000 - ? units i material Quantity = (4401930-4521200kgs x $1.70 variance Kgs >(-$19,159 $19,159 Favourable (li) Labour price vanance (actual - Standard x actual Hours t price price worked = ($17.80 - $18 x 79,800 Labour hour =(-7$ 15,960 = ($15,960 favourable

lity Labour efficiency Variance 3 (Actual - Standard x standard Hours Hours now hours price. 80, 750 hours Standard hours lunit -0.25 hour] 323,000 units - ? ? i labour efficiency - (79,800-80750 x $18 per hour ratio = (-7$ 17,100 = $17,100 Favourable) Variable overhead variance - Actual overhedrate standard overheadrate) x r. Actual hours worked = ($1.70 - $1.70) x 79,800 hours Neither Favourable nor unfavourable, * Actual overhead rate Actualvarade overhead cost Actual hours worked $135,82 L 24800 =($1070