Reference no: EM132438332
Nyundo Ltd manufactures a product whose standard variable cost is given below:
Direct materials (2 kg @ Sh 3) 6
Direct labour (0.75 hours @ Sh 4) 3
Variable overheads 1
The company treats fixed costs as period costs and therefore they are not charged to products.
The following information relates to the month of March 2018.
1/3/2018
31/3/2018
Sh
Sh
Stocks (all at standard cost)
Raw materials
12,000
6,000
Finished goods
36,000
42,500
The following information is available for the month of March 2018:
Sh
Sales @ Sh 20 per unit
200,000
Material purchases @ Sh 3.50 per kg
42,000
Direct labour cost (8000 hours)
30,000
Variable overheads
12,000
Material price variance (adverse)
21,000
The management is wondering whether they could have performed better.
Required:
Calculate the following variances in each case stating two possible causes:
a) Material usage variance
b) Labour rate variance.
c) Labour efficiency variance.
d) Variable overhead expenditure variance:
e) Variable overhead efficiency variance.