Madetoja Oy’s job-costing system has two direct-cost categories: direct materials and direct manufacturing labour. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labour-hours (DLH). At the beginning of 2018, Madetoja adopted the following standards for its manufacturing costs: 

The denominator level for total manufacturing overhead per month in 2018 is 40,000 direct manufacturing labour-hours. Madetoja’s flexible budget for January 2018 was based on this denominator level. The records for January indicate the following:

 Direct materials purchased .................................................................................. 25,000 kg at €5.20 per kg 

Direct materials used ............................................................................................... 23,100 kg 

Direct manufacturing labour .................................................................................. 40,100 hours at €14.60 per hour 

Total actual manufacturing overhead 

(variable and fixed) .....................................................................................................  €600,000 

Actual production ......................................................................................................   7800 output units.

Required

1. Prepare a schedule of total standard manufacturing costs for the 7800 output units in January 2018. 

2. For the month of January 2018, calculate the following variances, indicating whether each is favourable (F) or unfavourable (U): 

a. Direct materials price variance, based on purchases 

b. Direct materials efficiency variance 

c. Direct manufacturing labour price variance 

d. Direct manufacturing labour efficiency variance 

e. Total manufacturing overhead spending variance 

f. Variable manufacturing overhead efficiency variance 

g. Production-volume variance.Level 2 analysis 

Transcribed Image Text:

Input Cost per output unit 3 kg at €5.00 per kg 5 hours at €15.00 per hour Direct materials €15.00 Direct manufacturing labour Manufacturing overhead 75.00 €6.00 per DLH €8.00 per DLH Variable 30.00 Fixed 40.00 Standard manufacturing cost per output unit €160.00