Ayala plc accumulates the following data relative to jobs started and finished during the month of June 2020.

Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for £400,000. Selling and administrative expenses were £40,000. Assume that the amount of raw materials purchased equaled the amount used.

Instructions

a. Compute all of the variances for (1) direct materials and (2) direct labor.

b. Compute the total overhead variance.

c. Prepare an income statement for management. (Ignore income taxes.)

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Actual Standard Costs and Production Data Raw materials unit cost £2.25 £2.10 10,000 Raw materials units used 10,600 Direct labor payroll £120,960 £120,000 Direct labor hours worked 14,400 £189,500 15,000 Manufacturing overhead incurred Manufacturing overhead applied Machine hours expected to be used at normal capacity Budgeted fixed overhead for June £193,500 42,500 £55,250 Variable overhead rate per machine hour Fixed overhead rate per machine hour £3.00 £1.30