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At the end of June, the manager of the B.C. manufacturing plant was provided with the following variance analysis report. Favourable (F)/ Unfavourable (U) Budget
At the end of June, the manager of the B.C. manufacturing plant was provided with the following variance analysis report. Favourable (F)/ Unfavourable (U) Budget 326,000 Actual 339,000 variance 13,000 Production in units Production costs: Direct material Direct labour Variable overhead costs Fixed overhead costs Total production costs $943,189 1,141,000 195,600 154,850 $2,434,639 $949,176 1,157,475 202,022 147,470 $2,456,143 $(5,987) (16,475) (6,422) 7,380 $(21,504) The manager immediately called the production supervisor, demanding an explanation for the large unfavourable variance for the quarter. The production supervisor was puzzled. He thought the cost- cutting measures they had incorporated were beginning to work. He certainly wasn't expecting such a large discrepancy. The standard rates the plant was using with its normal costing system are summarized below. Volume Cost 1.20 kg per unit $2.40 per kg 0.25 hour per unit $14.00 per hour Direct material Direct labour Predetermined overhead rate: Variable Fixed 0.25 hour per unit 0.25 hour per unit $2.40 per hour $1.90 per hour Other relevant information: 1. 2. 3. A total of 414,000 kg of direct materials were purchased during the quarter at a cost of $2.60 per kilogram. A total of 395,490 kg of direct materials were used in production to manufacture 339,000 units. Payroll recorded 83,875 direct labour hours at an average cost of $13.80 per hour. (al) Calculate the following production variances. Material price variance s Material quantity variance Labour price variance Labour efficiency variances Variable overhead variance
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