Question
A manufacturing company makes a specialised epoxy adhesive and had the following STANDARD PRIME COSTS and STANDARD PRIME QUANTITIES budgeted to produce one batch (which
A manufacturing company makes a specialised epoxy adhesive and had the following STANDARD PRIME COSTS and STANDARD PRIME QUANTITIES budgeted to produce one batch (which is their basic unit) of their main product: Direct Materials: 200 litres at $45.00 per litre Direct Labour: 12 hours at $48.00 per labour hour Quantity produced: 500 Batches (Units) of the product. ACTUAL COSTS AND QUANTITIES FOR THE PERIOD: Direct material purchased: 150,000 litres at a TOTAL cost of $6,855,000 Direct material used: 101,500 litres used in production (all from the material purchased) Direct labour: 5,790 hours at a TOTAL cost of $283,710 Required: Standard Cost Prime Cost Variances (8 Marks total) a) Use the standard cost variance formulas to compute the four PRIME COST STANDARD COST VARIANCES. Show your results in the spaces shown below and indicate whether each variance is favourable (F) or unfavourable (U). (i) Direct material price variance = $____________ (ii) Direct material quantity variance = $____________ (iii) Direct labour rate variance = $____________ (iv) Direct labour efficiency variance = $____________
* Explanation in detail.
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