Reference no: EM132617090

Below is the information on the operation of Paprica Sdn. Bhd. which manufactures a health product under the brand name PP:

Standard Cost Card

Direct material           0.8kg at RM12 per kg             RM9.60

Direct labour             3 hours at RM6 per hour         RM18.00

Variable overhead       4 hours at RM2.90 per hour     RM 11.60

                                                                       RM 39.20 TOTAL

For the month of June 2020, the company has estimated to manufacture and sell 4,875 units of PP at a standard selling price of RM40 per unit. The actual results for that month were as follows:

1. A total of 5,200 units of PP was sold for RM197,600.
2. Direct materials of 4,100 kg were bought with the cost of RM51,250. However, only 3,600 kgs were consumed for production.
3. Direct labor hours of 9,000 hours were used totaling RM55,800.

Based on the information given, you are required to:

Problem a) Provide the formula and calculate each of the following variances. Then, determine whether each of them is Favourable (F) or Unfavourable (U):

i) direct material price variance;

ii) direct material quantity variance;

iii) direct labour rate variance; and

iv) direct labour efficiency variance.

Problem b) Based on your calculations in (a) above, explain your answers and provide ONE reason each for your answers for (i) and (iii).

Problem c) Explain the benefits of using variance analysis for Paprica Sdn. Bhd.