Question
FATT Bhd manufactures a single product. The following standard unit cost has been set for the product: Direct materials : 3 kg at RM3.5 per
FATT Bhd manufactures a single product.
The following standard unit cost has been set for the product: Direct materials : 3 kg at RM3.5 per kg Direct labour : 5 hours at RM4 per hour Variable overheads : RM2 per direct labour hour 1,800 units of the product were manufactured and sold in the period just ended 31st May 2021, with the following costs recorded: Direct materials : 5,900 kg purchased and used at a cost of RM22,420 Direct labour : 8,600 hours worked at a cost of RM36,120 Variable overheads : RM15,480
Required:
(a) Calculate the following variances for the period just ended:
(i) Material price variance; (2 marks)
(ii) Materials usage variance; (2 marks)
(iii) Materials cost variance; (1 mark)
(iv) Labour rate variance; (2 marks)
(v) Labour efficiency variance; (2 marks)
(vi) Labour cost variance; (1 mark)
(vii) Variable overhead efficiency variance; (2 marks)
(viii) Variable overhead expenditure variance; (2 marks)
(ix) Variable overhead cost variance. (1 mark)
(b) Suggest ANY FIVE (5) possible reasons for the cost variance calculated in part (a) above. (5 marks)
(c) Suggest FIVE (5) possible actions to address the reasons identified in part (b) above. (5 marks)
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