The N&M Co manufactures handbags. Recently one of the most popular handbags has been re-designed to incorporate more compartments and pockets in each bag. Each new handbag now requires 0.9 metres of material, which is 10% more material than the previous style of handbag required. However, a new material has also been chosen which costs only $9.50 per metre, which is 2% cheaper than the material used on the previous handbags. In August, the total amount of material used and purchased at this price was 49,900 metres. The design of the new handbag has meant that the production process became more complicated. Consequently, all staff required training before they could begin production. The manager of the sewing department expected each of the new handbags to take 90 minutes to make as compared to 70 minutes per handbag for the old style. N&M Co has 150 staff, each of whom works 450 hours per month and is paid a wage of $15 per hour. All staff worked all of their contracted hours in August on production of handbags and there was no idle time. No labour rate variance arose in August. Activity levels for August were as follows: Budgeted production and sales (units) 50,000 Actual production and sales (units) 54,000 The production manager at N&M Co is responsible for all purchasing and production issues which occur. N&M Co uses standard costing and usually, every time a design change takes place, the standard cost card is updated prior to production commencing. However, the company has replaced their accountant responsible for updating the standards with a trainee accountant who is still learning about her responsibilities. Consequently, the standard cost card for the new handbag has not yet been updated.

(a) Calculate the material variances in as much detail as the information allows for the month of August.

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To calculate the material variances we need to compare the actual usage and cost of materials with t... View the full answer