In Biden plc, the standard cost of making a product is as follows: Variable Costs: Direct Materials
Question:
In Biden plc, the standard cost of making a product is as follows:
Variable Costs:
Direct Materials 5kg @ € 1.70 per kg
Direct Labour 3 hours @ €10 per hour
Variable Production Overheads 3 hours @ €6 per hour
Budgeted Fixed Production Overheads €176,250
Budgeted production for March 2021 was 750 units.
In March, the actual results were as follows:
780 units were produced.
4,290kg of Direct Materials were used at a cost of €6,864.
2,184 Direct Labour hours were worked at a cost of €24,024.
Variable Production Overheads (based on Direct Labour Hours) cost €12,558
Fixed Production Overheads cost €192,400
Required: (a) Calculate the following variances:
(i) Direct Material Price Variance.
(ii) Direct Material Usage Variance.
(iii) Direct Labour Rate Variance.
(iv) Direct Labour Efficiency Variance.
(v) Variable Overhead Expenditure Variance.
(vi) Variable Overhead Efficiency Variance.
(vii) Fixed Overhead Expenditure Variance.
(b) Provide possible reasons for the Direct Material Variances and the Direct Labour Variances.
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso