IStark Industries ltd produces a single product known as product X. The company has set the

following direct materials and direct labor standards for product X:

Direct materials Direct labour

Standard quantity/hours per unit ? kgs 7.5 hours

Standard price/rate ? per kg Ksh 270

Standard cost per unit ? Ksh 2025

During the month of August, the company produced 4,000 units of product X. A total of

18,000 kgs of direct materials was purchased at a total cost of ksh3,780,000. The total direct

labour cost for the month was ksh8,381,000. All materials purchased during the month was

used in production. There was no direct materials inventory on hand at the start and at the end

of August.

Someone from the company's management has computed the following three variances:

Total materials cost variance: ksh 14,750 favorable

Direct materials usage variance: ksh75,250 unfavorable

Direct labor efficiency variance: ksh 297,000 favorable

Required:

1. Compute the standard price per kg of materials. (4 Marks)

2. Compute the standard quantity of materials allowed for actual production. (4 Marks)

3. Compute the standard quantity of direct materials allowed for one unit of product X.

(4 Marks)

4. Compute the actual direct labor cost per hour for month of August. (4 Marks)

5. Compute the direct labor rate variance. Also indicate whether it is favorable or

unfavorable. (4 Marks)

(Total: 20 Marks)