Reference no: EM132019531

Question - Thomas Company produces a standard-sized bookshelf. Standards and budgets relating to this product are contained in the following table:

Direct Materials (timber) 8 metres @ $6.00 metre

Direct Labour budget (@$20 per DLH) $160,000 Budgeted volume of output 20,000 bookshelves

Budgeted machine hours 10,000 machine hours

Budgeted variable overhead $30,000

Thomas Company uses machine hours to allocate variable overhead to products. The actual data for the period just ended were as follows:

Number of units produced 22,000 units

Actual direct materials purchases 165,000 metres

Cost of actual direct materials used $1,029,600 Actual direct material usage per bookshelf 10% lower than standard

Actual direct labour usage per bookshelf 0.3 DLH

Actual total direct labour cost $145,200

Actual variable overhead costs $22,000

Actual machine hours 8,800 machine hours

REQUIRED:

a. Calculate the direct materials price variance (based on purchases) and the direct materials quantity variance. Show all workings.

b. Calculate the direct labour rate and efficiency variances. Show all workings.

c. Calculate the variable overhead spending and efficiency variances. Show all workings.

ADDITIONAL INFORMATION

Thomas Company's management accountant has collected the following information relating to production of the window frame.

The company's materials purchasing manager decided to purchase a higher quality of timber. This increased the price of the timber, compared to standard.

The higher quality timber resulted in a reduction in reworks and scrap.

Thomas Company employees had to work overtime during the period, due to higher demand than expected.

Thomas Company's purchasing manager was able to get a very good price on the indirect materials used in the manufacture of the window frames (i.e. glue, nails etc.). Although she paid less for these materials, quality was not affected.