Question 1

Roxanne Ltd operates a variance accounting system, calculating material price variance on the receipt of materials into stock. The monthly budget is to make and sell 1600 units of a single product which has the following standard unit cost details:

	SQ	SP	$
Direct material	11.50 kg	$4.00 per kg	46
Direct labour	SH	SR
	4 hours	$5 per hour	20
Variable overhead	SH	VOAR
	4 hours	$2	8
Fixed overhead	SH	FOAR
	4 hours	$6.50	26
			100

The following actual data was recorded for last monthly accounting period:

Units produced	1,670
Materials purchased	24,000 kg, costing $92,400
Materials used	19,850 kg
Direct labour	6,590 hours, costing $34,268
Actual variable overheads	$12,920
Actual fixed overheads	$44,580

1. Calculate the following variances for last month:

1. Material price
2. Material usage
3. Material cost
4. Direct labour cost
5. Direct labour rate
6. Direct labour efficiency
7. Variable overhead cost
8. Variable overhead expenditure
9. Variable overhead efficiency

2. Critically analyse and explain the possible reasons for the occurrence of the various variances above.