Compute direct materials price and quantity variances

Reference no: EM132218614

Question - Goodfans Ltd produces a single product that uses standard costing system to control its costs. The standard and actual costs data for the month of June to produce one unit of product is given below: Standard cost (BWP) Actual cost (BWP) Direct materials: Standard: 4.0kg at P7.20 per kg 28.80 Actual: 4.4 kg at P6.70 per kg 29.48 Direct labour: Standard: 1.6 hours at P9.00 per hour 14.40 Actual: 1.4 hours at P9.70 per hour 13.58 Variable Manufacturing overhead: Standard: 1.6 hours at P3.60 per hour 5.76 Actual: 1.4 hours at P4.30 per hour 6.02 Total cost per Unit 48.96 49.08 During the month of June, 4 800 units of product were produced. The comparison of standard and actual cost on the basis of total cost is given below: Actual Cost (4 800 units x P49.08) P235 584 Standard cost (4 800 units x P48.96) P235 008 Difference in cost (Unfavorable) P 576 Degree Assignment July - December MA221 Business Management Accounting Â©BOU 2018 Page 4 of 5 During the month, the company purchased 21,120 kilograms of materials from its supplier. There was no inventory of materials in stock at the start and at the end of month. You are required to:

1. Compute Direct Materials price and quantity variances.

2. Compute direct labor rate and efficiency variances.

3. Compute variable manufacturing overhead spending and efficiency variances.

4. The total cost variance of P576 is only 0.25% of P235 008 standard cost which means the company's costs are well under control. Do you agree? Explain.

5. What are possible causes of variances that you have computed?

Reference no: EM132218614

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