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Alkozay Ltd. Manufactures started production of its new product line (shirts) in the month of November, which it sells to customers for embroidering with
Alkozay Ltd. Manufactures started production of its new product line (shirts) in the month of November, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Direct materials Direct labor Standard Price AFN 1.60 per yard Standard Quantity Standard Cost 1.25 yards AFN 2.00 AFN 12 per DLH 0.25 DLH 3.00 Variable overhead AFN 4 per DLH 0.25 DLH 1.00 Fixed overhead AFN 6 per DLH 0.25 DLH 1.50 AFN 7.50 Bilal Nabi, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Bilal Nabi asked CFO Muhammad Javid for more information. He provided the following overhead budgets, along with the actual results for November. The company purchased and used 112,000 yards of fabric during the month. Fabric purchases during the month were made at AFN 1.45 per yard. The direct labor payroll ran AFN 249,260, with an actual hourly rate of AFN 12.10 per direct labor hour. The annual budgets were based on the production of 1,000,000 shirts, using 250,000 direct labor hours. Though the budget for November was based on 80,000 shirts, the company actually produced 82,000 shirts
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