Entity Limited is a manufacturer of a component for the motor industry. The standard cost card for the component is shown below:

Actual production for the month ended 31 October 2001 was 200 units and the actual costs incurred were

Required:

Calculate the standard selling price of a component if the company requires a standard profit equal to 25% of the selling price.

(b) Calculate the following variances for the month of October 2001:
(i) material price (ii) material usage (iii) labour rate (iv) labour efficiency (v) variable overhead expenditure (vi) variable overhead efficiency (vii) total fixed overhead.

Give two reasons for each of the following variances:
(i) material price (2 marks)
(ii) labour rate. (2 marks)

Transcribed Image Text:

Direct materials Direct labour Variable factory overhead Fixed factory overhead Total standard cost 5 kilograms at 5.00 per kilogram 25 2 hours at 4.00 per hour 2.00 per direct labour hour 5.50 per direct labour hour 28414 11