QUESTION$/$ TASK $2(50\%)$:

OBJECTIVE: To enable learners to use variance analysis to benchmark performance and

further control organisational output, efficiency, and sustainability.

REQUIREMENT: Standard Costing & Variance Analysis

Task $2$a: CLO$3$

Question

Razi Company is a leather belt manufacturer based in Kelang, Selangor. For the most recent

period, the company estimated $400$ units of production. The following are the standard unit

costs:

Leather Belt

Standard cost per unit $($$$)$

Direct material $(2$m at $$1\mathrm{.}50$ per meter$)$

Direct labour $(1\mathrm{.}5$ hours at $$6$ per hour$)$

Variable production overhead $(1\mathrm{.}5$ hours at $$3\mathrm{.}40)$

$3\mathrm{.}00$

$9\mathrm{.}00$

$5\mathrm{.}10$

$17\mathrm{.}10$

The budgeted and actual units produced for this period were $400$ units. The costs incurred

per unit are as follows.

Leather Belt

Actual cost per unit $($$$)$

Direct material $(2\mathrm{.}1$m at $$1\mathrm{.}60$ per meter$)$

Direct labour $(1\mathrm{.}4$ hours at $$6\mathrm{.}50$ per hour$)$

Variable production overhead $(1\mathrm{.}4$hours at $$3\mathrm{.}10)$

$3\mathrm{.}36$

$9\mathrm{.}10$

$4\mathrm{.}34$

$16\mathrm{.}80$

Required:

Calculate the following variances based on the information provided and indicate whether

they are Favourable $($F$)$ or Unfavourable$($U$).$ Explain the reasons for each of the variations

that occurred.

a$)$

Material price variance

b$)$ Material usage variance

c$)$

Direct labour rate variance

d$)$ Direct labour efficiency variance

e$)$

f$)$

Variable overhead spending variance

Variable overhead efficiency variance

$(4$ marks$)$

$(4$ marks$)$

$(4$ marks$)$

$(4$ marks$)$

$(4$ marks$)$

$(4$ marks$)$

$($Total $24$ marks$)$