MAF551 Standard Costing & Variance Analysis (Advance Variance)

Question 1 Ezel Son Bhd produces and sells healthy drinks to local market since 2010. The company's plant is currently producing the company's best selling product known as Dzest which is sold at RM82 per bottle. The following information has been extracted from the standard cost card for a bottle of Dzest: RM per bottle Direct materials cost: GIN11 550ml @RM28 per litre 15.40 LEM12 250ml @RM32 per litre 8.00 CID13 200ml @ RM68 per litre 13.60 Direct labour cost: Skilled 15 minutes @ RM16 per hour 4.00 Semi-skilled 30 minutes @ RM8 per hour 4.00 Variable overhead 4.50 Fixed overhead 5.00 During the year ended 30 June 2019, 8,000 bottles of Dzest were produced and 7,850 bottles were sold. Other costs incurred were as follows: Direct materials cost: RM GIN11 5,060 litres @RM27 per litre 136,620 LEM12 1,740 litres @RM32.50 per litre 56,550 CID13 1,450 litres @ RM70 per litre 101,500 Direct labour cost: Skilled 1,925 hours @ RM15.00 per hour 28,875 Semi-skilled 4,070 hours @ RM9.00 per hour 36,630 Variable overhead 34,780 During the period, due to the short supply of material GIN11 in the market, the price of the material has increased to RM30 per litre. The company also plan to reduce the usage of material LEM12 to 220ml per bottle of product Dzest. As for the skilled labour, due to the new plant layout, the company plan to increase the labour hour by 5 minutes in order to produce better quality of product. The labour rate also increased by 10%. Required: a. Based on the above information, compute the following variances: Direct material yield variance ii. Direct labour mix variance iii. Variable overhead expenditure variance iv . Material price planning and operating variances for material GIN11 only v . Labour efficiency planning and operating variances for skilled labour only. (12 marks) b. Explain briefly any TWO (2) benefits of segregating the variances into planning and operating elements. (5 marks) (Total: 17 marks)