Question : Variance Analysis

The following standard cost data relate to the operation of Dragon Company for 2016. The standard cost per unit is based on the normal annual production of 15,000 units.

Standard cost per unit
Direct materials	4kg @ $5.00 per kg		$ 20.00
Direct labour	2hrs @ $12.50 per hr		$ 25.00
Variable overhead	2hrs @ $3.00 per hr		$ 6.00
Fixed overhead	2 labour hrs @ $5.00 per hr		$ 10.00
Total			$ 61.00

Actual production in 2016 was 10,000 units. The following data was obtained from Dragon Companys records:

Direct material purchases		45,000	Kilograms
Cost of direct materials purchases		$ 202,500
Actual direct labour hours		25,000	Hours
Actual direct labour costs		$ 325,000
Actual variable overhead costs		$ 100,000
Actual fixed overhead		$ 125,000

Required:

3a. Calculate and show flexible budget variance for each cost item. 3b. Calculate the following variances and indicate whether they are favourable or unfavourable.

v.Variable manufacturing overhead spending variance

vi.Variable manufacturing overhead efficiency variance

vii.Fixed manufacturing overhead spending variance

viii.Fixed manufacturing overhead efficiency variance