Ahlia Company developed standard costs for direct material and direct labor. In 2020, Ahlia estimated the following standard costs for one of their major products, the 10-gallon plastic container.

Budgeted quantity Budgeted price

Direct materials 0.10 pounds $30 per pound

Direct labor 0.05 hours $15 per hour

During June, Ahlia produced and sold 5,000 containers using 490 pounds of direct materials at an average cost per pound of $32 and 250 direct manufacturing labor-hours at an average wage of $15.25 per hour.

Instructions:

1. Compute the direct materials price variance. (3 marks)
2. Compute the direct manufacturing labor efficiency variance. (3 marks)

= 1,100 pounds x [$29.00 per pound - $30.00 per pound]

= 1,100 pounds x -$1.00 per pound

= -$1,100

the Direct Material Price Variance is negative $1,100, therefore, the Direct Material price variance is $1,100 .

Part B: (6 marks)

Zain company has a bottling plant for its drinks and has prepared flexible budgets:

	Flexible budgets
Bottles:	15,000	18,000	22,000
Production costs:	$	$	$
Materials	30,000	38,000	44,000
Labor	45,000	54,000	66,000
Overhead	25,000	25,000	25,000

Actual production was 19,500 bottles and the production costs incurred totalled $120,000.

Instructions:

What is the meaningful total variance for performance evaluation purposes?

Part C: (6 marks)

Ahmad Company produces two products, M and Z. In the year ending 30 April 2020, it produced 6,000 M and 12,500 Z and incurred costs of $1,850,000

The costs incurred are such that 30% are variable. 60% of these variable costs vary with the number of Z produced, with the remainder varying with the output of M.

The budget for the three months to 31 October 2020 is being prepared using an incremental approach based on the following:

• All costs will be 6% higher than the average paid in the year ended 30 April 2020.
• Efficiency levels will be unchanged.
• Expected output:

M 1,350 units

Z 6,890 units

Instructions:

What is the budgeted cost for the output of M (to the nearest $100) for the 3 months ending 31 October 2020?