=+12-40 KKK Comprehensive review of Chapters 11 and 12, working backwards from given variances OBJECTIVES 4, 5 The Whitlam Company uses a flexible budget and standard costs to aid planning and control of its machining manufacturing operations. Its costing system for manufacturing has two direct cost categories (direct materials and direct manufacturing labour—both variable) and two overhead cost categories (variable manufacturing overhead and fixed manufacturing overhead, both allocated using direct manufacturing labour-hours).

At the 40000 budgeted direct manufacturing labour-hour level for August, budgeted direct manufacturing labour is $800000, budgeted variable manufacturing overhead is $480000 and budgeted fixed manufacturing overhead is $640000.

The following actual results are for August:

Direct materials price variance (based on purchases) $176 000 F Direct materials efficiency variance 69 000 U Direct manufacturing labour costs incurred 522 750 Variable manufacturing overhead flexible-budget variance 10 350 U Variable manufacturing overhead efficiency variance 18 000 U Fixed manufacturing overhead incurred 597 460 Fixed manufacturing overhead spending variance 42 540 F The standard cost per kilogram of direct materials is $11.50. The standard allowance is 3 kilograms of direct materials for each unit of product. During August, 30000 units of product were produced. There was no beginning inventory of direct materials. There was no beginning or ending work in process. In August, the direct materials price variance was $1.10 per kilogram.

In July, labour unrest caused a major slowdown in the pace of production, resulting in an unfavourable direct manufacturing labour efficiency variance of $45000. There was no direct manufacturing labour price variance. Labour unrest persisted into August.

Some workers quit. Their replacements had to be hired at higher wage rates, which had to be extended to all workers. The actual average wage rate in August exceeded the standard average wage rate by $0.50 per hour.

Required 1 Calculate the following for August:

a total number of kilograms of direct materials purchased b total number of kilograms of excess direct materials used c variable manufacturing overhead spending variance d total number of actual direct manufacturing labour-hours used e total number of standard direct manufacturing labour-hours allowed for the units produced f production-volume variance.

2 Describe how the Whitlam Company’s control of variable manufacturing overhead items differs from its control of fixed manufacturing overhead items.