Case study 2

Tomorrow Aged Care (TAC) builds and runs aged care centres.

TAC runs on very tight budgets, and a fixed construction cost for each centre of $250,000 is set.

Once TAC raises $300,000, they commission construction on the next centre.

Recently, TACs CFO undertook a project to determine variances to the standard construction budgets set.

Projects are expected to be completed in 26 weeks and use the following standards.

Cost Item	Standard Cost	Standard quantities
Bricks	$500 per 1,000 bricks	50,000 bricks
Timber	$15 per square metre	1,000 square metres
Pre-Fabricated Walls	$10,000 per wall	8 walls
Other fixed costs	$45,000	Per construction project
Labour builders	$55 per hour	800 hours
Labour specialists	$70 per hour	400 hours
Sundries	$5,000	per construction project
Fees, permits and insurance	$10,000	Per construction project

Recently GAC completed construction on a new centre in Ballarat in regional Victoria, and the following information was obtained:

• The project commenced on 1 June and was completed 32 weeks later.
• GAC decided to purchase all materials from the same supplier. GAC purchased 75,000 bricks at a total cost of $36,000 and 2,000 square metres of timber for $32,000.
• GAC purchased the required pre-fabricated walls were purchased for $80,000.
• The balance of project costs, including other fixed costs of $47,500 totalled $58,000.
• Overall labour costs on the project were $70,000 for 1,250 hours of labour, with an even split of hours between builders and specialists engaged.

1.Calculate the total direct materials price and efficiency variances.

2.Calculate the total labour price and efficiency variances

3.Calculate the project overhead variance. Show your calculations.