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Amir Fikri Enterprise produces a product called AF. The company has set the following standard for producing one unit of AF: Budgeted fixed costs per
Amir Fikri Enterprise produces a product called AF. The company has set the following standard for producing one unit of AF: Budgeted fixed costs per year are estimated to be RM540,000. Estimated production and sales are 8,000 units and 7,500 units per month respectively. Variable overhead is absorbed based on direct labour hour and fixed overhead is absorbed based on number of units produced. Actual production and sales are 7,500 units for the month of December 2021 and the following costs are incurred: Required: a. Identify one reason for each of the following variances. i. Material price (adverse) ii. Material usage (adverse) iii. Labour efficiency (adverse) b. Calculate the following variances for the company for the month of December 2021: i. Direct material price variance ii. Direct material usage variance iii. Direct labour rate variance iv. Direct labour efficiency variance v. Variable overhead expenditure variance vi. Fixed overhead volume variance vii. Sales volume variance
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