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How to compute material and labor and overhead variances

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Reference no: EM132547558

Razaque steels produces different steel products (product A, product B and product C). The primary raw material is 40-foot long pieces of steel bars. These bars are custom cut and welded along with other material to make finished product. In addition, the final stages of production require grinding and sanding operations, along with a final coating of paint which are classified as indirect material within factory overhead. During April 2020, Razaque steels has produced 1000 units of product A.

Standard and actual figures are as follows:

                                                              STANDARD                                   ACTUAL

Direct Materials                  6,000 units @ Rs. 4/=                       9,800 units @ Rs. 4.50/=

Direct Labor                       5,000 hours @ Rs. 6/=                        6,000 hours @ Rs. 6.50/=

Factory overhead                 50% of Direct labor                               20.000 /=

Question 1: The director finance of Razaque steels has called a meeting and show his concerns over the bad performance. Compute Material, labor & overhead variances and comment on the results. In your opinion what is the reason behind company's bad performance? If you were the director of Razaque steels, what steps you would take to enhance the performance of the organization? give at least three examples to control material, labor and overhead variances, keeping in mind the recent situation of COVID-19.

Reference no: EM132547558

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