Please show all working in the space provided.

Start each calculation on a new line.

You will be required to calculate Direct Materials variances, Direct Labour variances and Variable Overhead variances (you are NOT required to do Fixed Overhead variances or Revenue variances).

For each of the variances calculations (b - g), specify whether the variance is favourable (F) or unfavourable (U).

Useful tip: You can use the "Budget Variances - summary of equations" pdf file located in the Week 9 tab in Moodle.

Question:

Crafty Cuts Ltd. produces and sells chairs.

The following provides information relating tostandard costsand inputs estimated at the start of the year.

InputStandard cost/inputDirect Material - wood5 wood planks per chairDirect Material - wood$4 per wood plankDirect Material - nails20 nails per chairDirect Material - nails$0.20 per nailDirect Labour hours - assembly4 hours per tableDirect Labour cost$22 per hourTotal variable overhead costs$800,000

At the start of the year it was estimated that Crafty Cuts would produce 20,000 chairs. Actual production was 19500 chairs this year.

The following provides information relating toactual costs and inputs incurred this year.

InputActual costs/inputsDirect Material - wood4.8 wood planks per chairDirect Material - wood$4.50 per wood plankDirect Material - nails20 nails per chairDirect Material - nails$0.20 per nailDirect Labour hours - assembly3.5 hours per tableDirect Labour cost$24 per hourTotal variable overhead costs$1,000,000

Required:

a) Calculate the Standard Variable Overhead Rate (1 mark)

b) Calculate the Direct Materials Price Variance (2 marks)

c) Calculate the Direct Materials Efficiency Variance (2 marks)

d) Calculate the Direct Labour Price Variance (2 marks)

e) Calculate the Direct Labour Efficiency Variance (2 marks)

f) Calculate the Variable Overhead Spending Variance (2 marks)

g) Calculate the Variable Overhead Efficiency Variance (2 marks)

h) What reasons do you believe may have caused the variances you calculated above? Marks are awarded for logical reasoning. There is no absolute right answer here