O'Shea Company manufactures ceramic vases. It uses its standard costing system when developing its flexible-budget amounts....

 

Transcribed Image Text:

O'Shea Company manufactures ceramic vases. It uses its standard costing system when developing its flexible-budget amounts. In April 2020, 2000 finished units were produced. The following information is related to its two direct mamufacturing cost categories of direct materials and direct manufacturing labour. Direct materials used were 4,400 kilograms. The standard direct materials input allowed for one output unit is 2 kilograms at $15 per kilogram, and5,000 kilograms of materials were purchased at S 16.50 per kilogram, for a total of $82,500. Actual direct manufacturing labour-hours were 3,250 at a total cost of S66,300. Standard manufacturing labour time allowed is 1.5hours per output unit, and the standard direct manufacturing labour cost is $20 par hour. 1. Calculate the direct materials rate and efficiency variances and the direct manufacturing labour rate and efficiency variances. The direct materials rate variance will be based on a flexible budget for actual quantities purchased, but the efficiency variance will be based on a flexible budget for actual quantities used. 2. Based on these results list in order from most to least important the variances you would investigate. Explain briefly what you considered in your ranking. 3. Give three alternative explanations for the most important variance. O'Shea Company manufactures ceramic vases. It uses its standard costing system when developing its flexible-budget amounts. In April 2020, 2000 finished units were produced. The following information is related to its two direct mamufacturing cost categories of direct materials and direct manufacturing labour. Direct materials used were 4,400 kilograms. The standard direct materials input allowed for one output unit is 2 kilograms at $15 per kilogram, and5,000 kilograms of materials were purchased at S 16.50 per kilogram, for a total of $82,500. Actual direct manufacturing labour-hours were 3,250 at a total cost of S66,300. Standard manufacturing labour time allowed is 1.5hours per output unit, and the standard direct manufacturing labour cost is $20 par hour. 1. Calculate the direct materials rate and efficiency variances and the direct manufacturing labour rate and efficiency variances. The direct materials rate variance will be based on a flexible budget for actual quantities purchased, but the efficiency variance will be based on a flexible budget for actual quantities used. 2. Based on these results list in order from most to least important the variances you would investigate. Explain briefly what you considered in your ranking. 3. Give three alternative explanations for the most important variance.

Answer rating: 100% (QA)

1 Material price variance Actual quantity purchased Standard price Actual quantity purchasedActual p... View the full answer