NUBI Limited operates a direct standard costing system. They produce one product which is manufactured withina single cost centre.

 

The standard cost of the product is as follows:

 

Direct material
Direct labour
Variable factory overheads	R1.20 per labour hour
Sales price per product	R45.00

 

The production schedule for June 2017 required the completion of 40 000 units. However, 40 960 units were completed during the month. There were no opening and closing work-in- process and finished goods inventories.

 

NUBI purchased 225 000 kg of direct material during June 2017. The material was purchased at R4.50 per kg, thesame price as paid in May 2017. The management of NUBI requires that the applicable variances be calculated atthe time of purchase and at the time of usage. NUBI uses the FIFO method of inventory valuation and a directcosting system.

 

Direct material inventory levels were:

 

	1 June 2017	30 June 2017
Direct material (kg)	45 000	64 400

 

Production and sales records for the month ending 30 June 2017 showed the following actual results:

 

Direct labour - 121 200 hours	R387 840
Variable factory overheads	R100 000
Sales	R2 211 840

1.1	Calculate the following:
1.1.1	Material price and usage variances
1.1.2	Labour rate and efficiency variances
1.1.3	Variable manufacturing overhead expenditure variance
1.1.4	Variable manufacturing overhead efficiency variances
1.1.5	Sales margin price and sales margin volume variance

Answer rating: 100% (QA)

SOLUTION 111 Material price and usage variances Material price variance AQ x AP SP where AQ is the actual quantity of material purchased and used AP is the actual price paid for the material and SP is ... View the full answer