Question
Apple Clothing Ltd is a manufacturing firm producing clothing items. The company is using a standard costing system for planning and controlling purposes. The standard
Apple Clothing Ltd is a manufacturing firm producing clothing items. The company is using a standard costing system for planning and controlling purposes. The standard cost card of the product, SAGA, reveals the following information:
Direct materials: 4 yards at $4.00 $16.00
Direct labour: 1.5 hours at $10.00 15.00
Variable overhead: 1.5 hours at $3.004.50
Fixed overhead: 1.5 hours at $7.00 10.50
Standard cost per unit$46.00
The company manufactured and sold 18,000 units of product during the last year. A total of 70,200 yards of material was purchased during the year at the cost of $4.20 per yard. All of this material was used to manufacture all the outputs. The company records showed no beginning or ending inventories for the year.
From the payroll records, it indicated payments of actual labour cost of $9.75 per hour for a total of 29,250 direct labour-hours worked.
Overhead costs were applied to products on the basis of direct labour hours. The amount of actual variable overhead costs incurred were $90,000.
For fixed overheads, the planned activity level (direct labour hours) was 22,500 hours. Budgeted fixed overhead costs as shown on the flexible budget were $157,500, while actual fixed overhead costs incurred were $156,000.
Required:
For the purpose of preparing the monthly performance report for the last month, calculate the following cost variances:
(a)Direct material price variance
(b)Direct material quantity variance
(c)Direct labour rate variance
(d)Direct labour efficiency variance
(e)Variable overhead spending variance
(f)Variable overhead efficiency variance
(g)Fixed overhead budget variance
(h)Fixed overhead volume variance
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