MANAGEMENT ACCOUNTING - VARIANCE ANALYSIS

Question 1- Basis Variances ABC Company operates a standard costing system and analysis of variance is made every month. The standard cost per unit for product X is as follows: GHS Direct Material (0.5kg @ GHS 4 per kg) Direct Wages (2hrs @ GHS 2 per hr) Variable Overheads Fixed overheads Standard Cost Standard Profit Standard Selling Price 2.0 4.0 0.6 1.4 8.0 2.0 10.0 Budgeted production for product X is 500 units. Actual results for June 2014 were as follows: 485 units of the product were produced and sold at GHS 9.75 per unit. Materials consumed in production amounts to 280kg at a cost of GHS 980 and labour cost of GHS 1,680 for 672 hours was incurred. Variable overhead amounted to GHS 260 and fixed overheads amounted to GHS 730. All overheads are absorbed on direct labour hours. 1. ANALYSE VARIABLE OVERHEAD VARIANCE 2. ANALYSE FIXED OVERHEAD VARIANCE