PART B - CASE STUDY AND PRACTICAL QUESTION

During June, Harry Hand Pty Ltd purchased 6,200 kgs of raw materials at a price of $5.6 per kgs. Actual cost incurred in the production of 3,000 finished units were followings: Direct labour: $112,995 (@ $18.6 per hour) Direct materials: $26,880 (@ $5.6 per kg) Actual fixed overhead: $11,000 Actual variable overhead: $47,385 Harry Hand adopts standard costing system to record and manage manufacturing costs and applies manufacturing overhead to products on the basis of labour hours. The standard cost and budget information for June as follows: Direct labour 2.1 hours at $18.5 per hour Direct materials 1.5 kgs at $5.5 per kg Budgeted activity level 2,800 units Fixed overhead $2 per labour hours (budgeted at 2,800 units of production output) Variable overhead $8 per labour hours Required: 1. Prepare costing sheet to detail the total manufacturing cost and manufacturing cost per unit, based on standard costing system. 2. Calculate variances for direct materials cost, direct labour costs and manufacturing overheads. 3. Analyse the variance, propose various possible reasons to explain the variance and suggest solutions to solve unfavourable variances.

Calculations in part B can be presented as long as it illustrates clearly how you get to the final answers