Question 3: Variance Analysis (20 marks in total)

You have introduced a standard cost accounting system for FOL. The following standard costs have been developed for producing 1kg of the Cattle drench.

Direct materials (1 kilogram)				$ 20
Direct Labour (.25 hours)				$ 15
Overhead (DLH basis)			$ 3
			$ 38

Production and cost information for May was:

Actual direct material purchased		1200	kilograms
Actual direct materials issued		900	kilograms
Actual output		800	kilograms
Actual cost of materials purchased	$ 25,500
Actual direct labour rate		$ 60	per hour
Actual direct labour hours		280
Actual overhead costs		$ 4,500

Required

1. Calculate the following standard cost variances for May and provide general journal entries to record the cost flows for May.

(a) materials price

(b) materials usage

(c) direct labour rate

(d) direct labour efficiency

(e) total overhead