A company makes and sells a single product and it operates a standard marginal costing system. The standard cost of the product is as follows:

$ per unit

Direct materials

5 kilograms at $8 per kilogram

40

Direct labor

6 hours at $8 per hour

48

Production overheads

6 hours at $6 per hour

36

124

At the beginning of the week, the company budgeted to produce 60 units. Production overhead is charged based on the labour hours. It is expected to take 70 labour hours to produce the budgeted output. The following table shows the actual results for the week.

Output

59 units

Material used

400 kilograms

Total material cost

$720

Labour hours taken

60 hours

Total labour cost

$480

Overhead incurred

$420

The selling price is $142 per unit. All the products are sold as soon as produced, so there is neither opening nor closing inventory.

Required:

a.Calculate the following variances:(10 marks)

i.Material price variance

ii.Material usage variance

iii.Labor rate variance

iv.Labor efficiency variance

v.Overhead total variance

b.Explain the four types of performance standards.(10 marks)