Wells Ltd manufacture luxury chocolate doughnuts. For February 2022 they budgeted to use 0.3kg of cocoa powder to make one doughnut at £2.80 per kg. The budgeted output was 50,000 doughnuts. Actual output was 52,000 doughnuts. 16,000kg of coca powder were used costing £44,320. Each doughnut should take one hour to make and the standard wage rate is £12 per hour. Actual time taken was 52,500 labour hours for £691,000. Actual variable production costs was £39,000. Standard variable production overhead recovery rate was £1.00 per labour hour. Budgeted fixed production overhead was £30,000 apportioned on the basis of labour hours. Actual fixed production overheads were £29,000.

1. Calculate the material price and usage variances.
2. Calculate the labour rate and efficiency variances.
3. Calculate the variable production overhead rate variance.
4. Calculate the fixed production expenditure and volume variances. 
5. Comment on the possible reasons for each variance calculated and suggest how the adverse variances can be avoided.

Answer rating: 100% (QA)

a Materials price variance Materials usage variance b Labor rate variance ... View the full answer