Question
Kims candles is a company that makes specially scented branded candles. The standard candle uses 200g of wax and 15minutes of labour time to make.
Kims candles is a company that makes specially scented branded candles.
The standard candle uses 200g of wax and 15minutes of labour time to make. Employees are paid 9.00 per hour and wax is bought at 10 per kg. Standard variable overheads are charged at 6 per labour hour and it is expected that each candle can be sold for 12.00. The companys budgeted production per month was 1100units.
During a month the following actual data was recorded.
Production = 1000units
Wax bought and used =198kg
Cost of wax bought and used =2,100
Labour hours worked and paid =240hours
Labour cost during the period =2360
Variable overhead cost =1500
Actual units produced =950 units
Sales revenue =11,800
The owner of the company is a close friend and has asked for your help to assess the performance of the business.
Required
a:Calculate the following variances
- Material cost and usages variances
- Labour rate and efficiency variances
- Variable expenditure and efficiency variances
- Sales price and volume variances
b:Write a report to the owner of the business explaining the steps of the standard costing process, discussing your main findings and giving reasons for the material and labour variances
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