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King Limited operates a standard absorption costing system. During last month, it made only one product, the LION2. The following information is known about
King Limited operates a standard absorption costing system. During last month, it made only one product, the LION2. The following information is known about LION2: Standard cost (for one unit of LION2): Direct materials Direct labour Variable overhead Fixed overhead Standard cost Standard profit margin cost ($) 4kg $/kg: 4 3hours $/hour: 7 3hours $/hour: 3 3hours $/hour: 4 FeNR N Standard selling price Budgeted output and sales for last month: 800 units Actual results for last month (700 units of LION2 produced and sold) cost ($) Direct materials used 3 100kg $/kg: 4,25 13 175 Direct labour worked 2 350hours $/hour: 6,4 15 040 Variable overhead 6 700 Fixed overhead 9 200 Sales revenue 700units price / unit ($): 79 55 300 Required: a. Calculate direct material price and usage variances, and the total material variance for the last month. b. Calculate direct labour rate and efficiency variances, and the total labour variance for the last month. c. Suggest possible reasons for these variances.
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