Met Towels plc. Produces and sells standard bath towels. The company uses a standard costing system; the standards in use for the latest month of production (January 2005) are as follows:

Direct Material Usage	1.5 m2 of material per towel
Direct Material Cost	£2 / m2
Direct Labor Usage	0.1 hour per towel
Direct Labor Cost	£7.50 / hour
Machine Hours Usage	3 minutes per towel

For the month of January 2005, the company expected to produce 100,000 towels and use £240,000 in variable overhead and £155,000 in fixed overhead. The costing system applies VOH using machine hours and FOH using direct labor hours.

At the end of January 2005, the company actually produced 100,000 towels. Additional actual information is as follows:

Direct Material Used	135,000 m2 (amount used = amount purchased)
Direct Material Cost	£276,750
Direct Labor Hours	11,500 hours
Direct Labor Cost	£94,990
Machine Hours Used	290,000 minutes
Variable Overhead	£249,400
Fixed Overhead	£140,000

Required:  

Prepare a full cost variance analysis for Met Towels in January 2005.

Prepare a fixed overhead variance analysis for Met Towels in January 2005.

Answer rating: 100% (QA)

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