Question 2 20 Marks c) Calculate the labour efficiency and rate variance. [4 marks] Standard Costs and Variance Oakland outdoor furniture is a manufacturer and retailer of wooden outdoor furniture for both commercial and residential customers. The range of products they offer include an eight-seater picnic table which proving to be very popular. The items manufactured and sold are published in a catalogue that is available online. The company maintain a standard costing system that allows them to monitor manufacturing efficiency and turnover. The following standard cost are in relation to the eight-seater picnic table. d) Comment on the variances and make suggestions to the company as to how they may address the issues suggested by these variances. [3 marks] e) Calculate the variable manufacturing overhead variance. [4 marks] Picnic Tables Standard cost to produce one 8 seater round picnic table Direct Materials (Treated pine planks) Direct Labour Variable Overheads Standard Quantity 14m 2.5 hours 2.5 hours Standard Price Standard Cost or Rate $65/5m length $ 182.00 $45/hour $ $5/hour $ 15.00 112.50 e) Comment on the variances and make suggestions to the company as to how they may address the issues suggested by these variances. [2 marks] Total Cost Perunit $ 309.50 Additional Notes and Information During the month of May, the company recorded the following activity in relation to the manufacture of the picnic tables. The wood is sold in 5m lengths meaning that the per metre length is $65/5 = $13/m The company produced 400 tables. A company purchased 1,250 x 5m lengths in May although it only used 1,140 5m lengths to manufacture the 400 tables. The cost of the wood purchased in May was $77,800 The time allocation log recorded a total of 980 hours were spent on the assembly of the 400 picnic tables. The labour cost for the period allocated to the tables was $47,000. Variable manufacturing overheads is assigned to the park benches based on direct labour hours. The total variable manufacturing overhead cost for the month was $5,800. The picnic tables were sold wholesale to bunnings and Mitre 10 for $400 each although the recommended retail price is $600. Required: Answer the following questions in relation to the above information. a) Calculate the direct materials price and quantity variance. [4 marks] b) Comment on the variances that you have calculated and make suggestions to the company as to how they may address these variances. [3 marks]