REQUIREMENT:

Standard Costing & Variance Analysis

Task 1: CLO3

Sap Sdn. Bhd. is a wholesale manufacturer of tea products. It operates a variable costing system. Given below, is information relating to one of its products, i.e. bottled premium tea leaves-grade A, which is made in one of the company departments: -

Bottled premium tea leaves-grade AStandard variable product cost

Unit (RM)

Direct material

(6 kilograms at RM4 per kg)24

Direct labour

(1 hour at RM7 per hour)7

Variable production overhead (1 direct labour hour)3_

34

Additional information

-Variable production overhead varies with direct labour hours of input

-Budgeted fixed production overhead per month is RM100,000

-Budgeted production is 20,000 bottles per month

Actual production and costs for one of the months were as follows:

Bottles produced18,500 bottles

(RM)

Direct materials purchased and used, 113,500kg442,650

Direct labour, 17,800 hours129,940

Variable production overhead incurred58,800

Fixed production overhead incurred104,000

735,390

Required:

Compute the following variances and give reasons for the variances:

a.Material price variance

b.Material usage variance

c.Direct labour variance

d.Direct labour efficiency variance

e.Variable overhead spending variance

f.Variable overhead efficiency variance

g.Fixed overhead spending variance