Grateful Ltd uses a standard costing system. The company allocates overhead on the basis of machine...
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Grateful Ltd uses a standard costing system. The company allocates overhead on the basis of machine hours. The standard machine hour for each unit of the product is 0.5 machine hours and the standard variable overhead rate is $3.00 per machine hour. The standard quantity of direct materials was 3 kg per unit. During the month, actual direct materials purchased and used by the company amounted to 165,000 kg. The actual purchase price of the materials was $3.20 per kg. The production manager informed you that the actual hours worked by the company for the month was 97,000 labour hours. The company's actual wage rate for the period was $13.00 per labour hour. The production cost report shows the following: Standard price of materials was $2.50 per kg Standard labour rate was $15.00 per labour hour Grateful's actual variable overhead cost for the month amounted to $81,900. The actual total machine hours for the period was 23,400 machine hours. The actual production for the month of Nov was 52,000 units. The standard direct labour hours was 1.5 hours per unit. Required: (a) Calculate the following variances : (i) All necessary direct material variances (ii) All necessary direct labour variances (iii) All necessary variable overhead variances (15 marks) Comment and discuss on all variances computed above. (9 marks) (b) Grateful Ltd uses a standard costing system. The company allocates overhead on the basis of machine hours. The standard machine hour for each unit of the product is 0.5 machine hours and the standard variable overhead rate is $3.00 per machine hour. The standard quantity of direct materials was 3 kg per unit. During the month, actual direct materials purchased and used by the company amounted to 165,000 kg. The actual purchase price of the materials was $3.20 per kg. The production manager informed you that the actual hours worked by the company for the month was 97,000 labour hours. The company's actual wage rate for the period was $13.00 per labour hour. The production cost report shows the following: Standard price of materials was $2.50 per kg Standard labour rate was $15.00 per labour hour Grateful's actual variable overhead cost for the month amounted to $81,900. The actual total machine hours for the period was 23,400 machine hours. The actual production for the month of Nov was 52,000 units. The standard direct labour hours was 1.5 hours per unit. Required: (a) Calculate the following variances : (i) All necessary direct material variances (ii) All necessary direct labour variances (iii) All necessary variable overhead variances (15 marks) Comment and discuss on all variances computed above. (9 marks) (b)
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