Goodmonth Tyre Co. uses a standard cost system for its tyres. The company has a normal capacity of 20,000 DL hours. The costs are as follows:

		Standard Costs				Actual Costs
Direct Materials		5 kg. of plastic at £2.40/kg.				6 kg. of plastic at £2.50/kg.
Direct Labor		5 hrs./unit at £10.00/hr.				27,500 hours, £288,750 total payroll
Overhead		Budgeted Fixed:£12,500				Fixed: £31,200, Variable: £20,000
		Variable Rate:£1.50/DL hour

During February, 5,000 units were scheduled and produced.

Required

a). Find the fixed rate for manufacturing overhead.

b). Compute the following cost variances for the month of February:

            1) Direct materials price variance

            2) Direct materials quantity variance

            3) Direct labor rate variance

            4) Direct labor efficiency variance

         

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