Reference no: EM132324785
Question :
Concita Ltd. uses a standard cost system and sets predetermined overhead rates on the basis of direct labour hours. The company's budget indicates the following data for the current year.
|
Denominator activity
|
5,000 units
|
|
Variable manufacturing overhead (10,000 direct labour hours @$3.42)
|
$34,200
|
|
Fixed manufacturing overhead cost
|
$70,000
|
|
Predetermined overhead rate ( $104,200+10,000 direct labour hours)
|
$10.42
|
The standard cost card for the company's only product is given below:
|
|
Standard Quantity
or hours
|
Standard price
or rate
|
Standard cost
Per Unit
|
|
Direct materials
|
4 kilograms
|
$2.60 per kilogram
|
$10.40
|
|
Direct labour
|
2 direct labour hours
|
$8 per direct labour hour
|
16.00
|
|
Variable overhead
|
2 direct labour hours
|
$3.42 per direct labour hour
|
6.84
|
|
Fixed overhead
|
2 direct labour hours
|
$7 per direct labour hour
|
14.00
|
|
Total standard cost
|
|
|
$47.24
|
During the year, the company produced 4,800 units of product and incurred the following costs:
| |
Quantity |
Amount |
| Direct materials purchased |
30,000 kilograms |
$81,000 |
| Direct materials used. |
20,000 kilograms |
|
| Direct labour |
10,000 hours |
$86,000 |
| Variable manufacturing overhead cost |
|
$35,900 |
| Fixed manufacturing overhead cost |
|
$64,800 |
Required (show your workings):
1. Calculate favourable or unfavourable price & efficiency variance for direct materials
2. Give a plausible explanation for the variance occurred for direct materials
3. Calculate favourable or unfavourable price & efficiency variance for direct labour
4. Give a plausible explanation for the variance occurred for direct labour
5. Calculate favourable or unfavourable Spending & Efficiency variance for Variable MOH
6. Give a plausible explanation for the variance occurred for Variable MOH
7. Calculate favourable or unfavourable Budget & Volume variance for Fixed MOH
8. Give a plausible explanation for the variance occurred for Fixed MOH