Reference no: EM133012097
Question - A company makes and sells a single product and it operates a standard marginal costing system. The standard cost of the product is as follows:
$ per unit
Direct materials 5 kilograms at $8 per kilogram 40
Direct labor 6 hours at $8 per hour 48
Production overheads 6 hours at $6 per hour 36
124
At the beginning of the week, the company budgeted to produce 60 units. Production overhead is charged based on the labour hours. It is expected to take 70 labour hours to produce the budgeted output. The following table shows the actual results for the week.
Output 59 units
Material used 400 kilograms
Total material cost $720
Labour hours taken 60 hours
Total labour cost $480
Overhead incurred $420
The selling price is $142 per unit. All the products are sold as soon as produced, so there is neither opening nor closing inventory.
Required -
a. Calculate the following variances:
i. Material price variance
ii. Material usage variance
iii. Labor rate variance
iv. Labor efficiency variance
v. Overhead total variance
b. Explain the four types of performance standards.
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