$10$:$28$

LTE

Assignment Question $-$ Cost...

ASSIGNMENT

Due Date: Wednesday, ${16}^{th}$ April $2025$

XYZ Manufacturing Company produces a single product. The following standards have been set for each unit of product:

Direct Materials: $4$ kg per unit at a standard price of K $5\mathrm{.}00$ per kg $.$

Direct Labor: $2$ hours per unit at a standard rate of K$15\mathrm{.}00$ per hour.

Variable Overhead: Applied at K$8\mathrm{.}00$ per direct labor.

Fixed Overhead: Budgeted at K$20,000$ for an expected production of $1,000$ units.

The company expected to produce and sell $1,000$ units this period. The standard selling price was set at K$120$ per unit. Actual results for the period are as follows:

Output and Sales: $900$ units were produced and sold at an average price of K$125$ per unit.

Direct Labor: $1,700$ hours of labor were used, at a total cost of K$27,200.$

Variable Manufacturing Overhead: Actual variable overhead costs incurred were K$14,000.$

Direct Materials: $3,800kg$ of material were purchased and used, at a total cost of K$18,240.$

Fixed Manufacturing Overhead: Actual fixed overhead costs incurred were K$21,000.$

Assume there were no beginning or ending inventories $($all units produced were sold$).$ Using this scenario, answer the questions below. Show all calculations clearly and provide concise explanations where required.

Express the standard information in the form of a standard cost card.

Compute all the direct material variances and direct labor variances for the period, based on the standards and actual results provided.

Analyze the manufacturing overhead variances for the period. Calculate the following:

a$)$ Variable overhead spending variance and variable overhead efficiency variance.

b$)$ Fixed overhead budget $($spending$)$ variance, fixed overhead volume variance, fixed overhead volume efficiency variance and fixed overhead volume capacity variance.

Interpret the variances computed above and discuss how management can use this information for control purposes.