Question
North Company produces jackets. The company uses a standard cost system to control manufacturing costs. Its monthly budgeted production is 500 jackets and the budgeted
North Company produces jackets. The company uses a standard cost system to control manufacturing costs. Its monthly budgeted production is 500 jackets and the budgeted selling price per jacket is Kr 1 000. The following data represents the standard unit cost of a jacket:
Direct material (3.0 square metres each at Kr 50) Kr 150
Direct labour (2 hours each at Kr 150) Kr 300
Variable overhead (2 hours each at Kr 50) Kr 100
This companys fixed overhead in total was budgeted to be Kr 850 000.
The actual data for October of the current year include the following:
- Actual production was 400 jackets and each jacket was sold at Kr 1 100.
- Actual direct material usage was 1 600 square metres worth Kr 96 000.
- Actual direct labour usage of 1 000 hours for a total cost of Kr 160 000.
- Actual fixed overhead cost was Kr 750 000, whilst actual variable overhead cost was Kr 60 000.
Based on the information above, compute all possible variances.
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