Reference no: EM133065770

Standard costs for control

Question 1
Johnson Ltd manufactures a single product, A. The standard cost specification sheet shows the following for one unit of A:

6 kg of material X @ $15/kg $90

Actual costs incurred in July when 10000 units of A were produced were:
67000 kg of material were purchased at $16.50/kg 59000 kg of material were used

Required:
a) Calculate the Direct Material Price Variance
b) Calculate the Direct Material Quantity Variance

Question 2: Johnson Ltd manufactures a single product, A. The standard cost specification sheet shows the following for one unit of A:

4 hours of direct labour @ $12.50/hour $50

In July 10000 units of A were actually produced, and 38500 direct labour hours were actually
consumed at an average wage rate of $12.60 per hour.

Required:
a) Calculate the Direct Labour Rate Variance
b) Calculate the Direct Labour Efficiency Variance

Question 3: Security Doors has a standard variable overhead rate of $4 per direct labour hour. The standard quantity of direct labour per unit of production is 3 hours. The company's static budget was based on 50,000 units. Actual results for the year are as follows:

Actual units produced 45,000
Actual direct labour hours 120,000
Actual variable overhead $495,000

Calculate the following variances and indicate whether each is favourable or unfavourable.
a) The variable overhead spending variance
b) The variable overhead efficiency variance

Question 4: CB company has set the following standard cost per unit for 2011: Fixed overhead: 4 machine hours @ $10 per machine hour
The standards were set based on a capacity of 20000 machine hours.During the year 6000 units were produced.Actual fixed overhead was $205,000.

Calculate the following variances and indicate whether each is favorable or unfavourable:
1. Fixed overhead budget variance
2. Fixed overhead volume variance

Question 5: Broome Instruments Company manufactures a control valve used in air-conditioning systems. The manufacturing overhead rate is based on a normal annual activity level of 600 000 machine hours. The company planned to produce 25 000 units each month during 2011. The budgeted manufacturing for 2011 is as follows:

Variable: $3600 000
Fixed: 3000 000
Total $6 600 000

During November, the company produced 26 000 units and used 53 500 machine hours. Actual manufacturing overhead for the month was $260 000 fixed and $320 000 variable. The total manufacturing overhead applied during November was $572 000. The standard cost of a control valve is as follows:

Direct material $14.50
Direct labour (3 hrs @ $ 6) 18.00
Manufacturing OH (2 mhrs @ $11) 22.00
Total standard cost $54.50

Required:
1) Calculate the standard variable overhead rate and standard fixed overhead rate based on machine hours;
2) Calculate the variable and fixed overhead variances for November and indicate whether each variance is favourable or unfavourable.