Prepare an analysis of the variances for materials

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Reference no: EM131589949

Problem - Amber Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labour hours. The following data are taken from the company's budget for the current year.

Denominator activity

4,500 units

Variable manufacturing overhead (9,000 direct labour hours @53.80)

$34,200

Fixed manufacturing overhead cost

$63,000

Predetermined overhead rate ( 597,200+9,000 direct labour hours)

510.80

The standard cost card for the company's only product is given below:


Standard Quantity
or hours

Standard price
or rate

Standard cost
Per Unit

Direct materials

4 kilograms

$2.60 per kilogram

$10.40

Direct labour

2 direct labour hours

$9 per direct labour hour

18.00

Variable overhead

2 direct labour hours

$3.80 per direct labour hour

7.60

Fixed overhead

2 direct labour hours

57 per direct labour hour

14.00

Total standard cost



$50.00

During the year. the company produced 4.800 units of product and incurred the following costs:

 

Quantity

Amount

Direct materials purchased

30,000 kilograms

$75,000

Direct materials used

20,000 kilograms

 

Direct labor

10,000 hours

$86,000

Variable manufacturing overhead cost

 

$35,900

Fixed manufacturing overhead cost

 

$64,800

Required:

(a) Prepare an analysis of the variances for materials and labour for the year.

(b) Prepare an analysis of the variances for variable and fixed overhead for the year.

(c) Based on the results from your analysis above, comment on the cost control efficiency of the company.

Reference no: EM131589949

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