PART B $$ CASE STUDY AND PRACTICAL QUESTION

During June, Harry Hand Pty Ltd purchased $6,200$ kgs of raw materials at a price of $$5\mathrm{.}6$ per kgs$.$

Actual cost incurred in the produc$$on of $3,000$ finished units were followings:

$$ Direct labour: $$112,995($@ $$18\mathrm{.}6$ per hour$)$

$$ Direct materials: $$26,880($@ $$5\mathrm{.}6$ per kg$)$

$$ Actual fixed overhead: $$11,000$

$$ Actual variable overhead: $$47,385$

Harry Hand adopts standard cos$$ng system to record and manage manufacturing costs and

applies manufacturing overhead to products on the basis of labour hours. The standard cost and

budget informa$$on for June as follows:

Direct labour $2\mathrm{.}1$ hours at $$18\mathrm{.}5$ per hour

Direct materials $1\mathrm{.}5$ kgs at $$5\mathrm{.}5$ per kg

Budgeted ac$$vity level $2,800$ units

Fixed overhead $$2$ per labour hours $($budgeted at $2,800$ units of

produc$$on output$)$

Variable overhead $$8$ per labour hours

Required:

$1.$ Prepare cos$$ng sheet to detail the total manufacturing cost and manufacturing cost per

unit, based on standard cos$$ng system.

$2.$ Calculate variances for direct materials cost, direct labour costs and manufacturing

overheads.

$3.$ Analyse the variance, propose various possible reasons to explain the variance and suggest

solu$$ons to solve unfavourable variances.