Reference no: EM132594649
Assume that during the past month, The Sultan produced 10,000 cartons of Sharpline highlighters. Sharpline has a translucent barrel and cap with a visible ink supply for see-through colour. The special fluorescent ink is fade- and water-resistant. Each carton contains 100 boxes of markers, and each box contains five markers. The markers come in boxes of one of five fluorescent colours-orange, blue, yellow, green, and pink-and in a five-colour set.
The standard cost for one carton of 500 markers is as follows:
Standard
Manufacturing Cost Elements Quantity Price Cost
Direct materials
Tips (boxes of 500) 500 × $0.04 = $ 20.00
Translucent barrels and caps (boxes of 500) 500 × $0.08 = 40.00
Fluorescent ink (5-litre container) 5 litres × $6.40 per litre = 32.00
Total direct materials $ 92.00
Direct labour 0.25 hours × $10.20 = 2.55
Overhead 0.25 hours × $48.00 = 12.00
$ 106.55
During the month, the following transactions occurred in manufacturing the 10,000 cartons of highlighters:
1. Purchased 10,000 boxes of tips for $143,000 ($14.30 per 500 tips); purchased 10,200 boxes of translucent barrels and caps for $459,000 ($45 per 500 barrels and caps); and purchased 9,900 containers of fluorescent ink for $329,175 ($33.15 per five-litre container).
2. All materials purchased during the period were used to make markers during the period.
3. A total of 2,300 direct labour hours were worked at a total labour cost of $22,540 (an average hourly rate of $9.80).
4. The variable manufacturing overhead incurred was $38,600, and the fixed overhead incurred was $86,000.
The manufacturing overhead rate of $48.00 is based on a normal capacity of 2,600 direct labour hours.
Instructions:
Question (a). Compute the Sultan's total variance.
Question (b). Compute the Sultan's variance for each direct materials, direct labour, and manufacturing overhead.
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