Q.3 ABC manufacturing company set up the following standard cost for the forthcoming period for its product.

Standard cost card.

Direct Material(2kg @ Rs.3.00 per kg)............... .Rs.6.00

Direct Labor(2 hours @ Rs.4 per hour)..................8.00

Variable overhead (@ Rs.3 per direct labor hour)............6.00

Fixed overhead (@ Rs.2. per direct labor hour).............4.00

Total production cost per unit...........................24.00

Profit.................................................................6.00

Selling price.............................. .......................30.00

Budgeted production and sales estimated................20,000 units

Actual results for the period were as under:

-Actual production and sales were 15,000 units @ 31.00

-Direct material purchased and used 31,500kg @ Rs.2.95 per kg

-Direct wages paid 29,500 hours @ R.4.15 per hour.

-Variable overhead incurred..................Rs.100,000

-Fixed overhead incurred ....................Rs.75,000

Required: Compute and identify the person responsible for these variances.

a.Material Variances (price, quantity and total variances)

b.Labor variance (rate, efficiency and total variances)

c.Variable overhead variances (spending (expenditure), efficiency and total variances)

d.Fixed overhead variances (expenditure (budget), volume and total variances)

e.Sales variances (price, quantity and total variance)

Q4. Gallery Corporation makes two products, footballs and baseballs. Additional information follows:

FootballsBaseballs

Demand (Units)2,000 3,000

Selling price per unit$30$8

Total variable costs per unit$ 12$ 4

Fixed costs10,0005,250

Yards of leather per unit1.250.25

Direct labor hours required per unit0.751.0

Assume that Gallery is able to purchase only 2,500 yards of leather and wishes to maximize its income. Total labor hours available for production is 4,600 hours.

Required:

a.Identify the limiting factor.

b.What will be the sales at which Gallety Corp will be at maximum profit by considering limiting factor.

Q5. Barber Manufacturing currently makes 2,000 units of gas-powered leaf blowers each year. However, the company has found a manufacturing company that can provide the blowers at a price of $14 each. The company is considering purchasing the blowers. If the company purchases the blower, the machine can be used to produce 5,000 units of another product that would generate a contribution of $2 per unit. There will be no need of supervisor if Barber goes for outsourcing. Barber's standard cost for a blower is listed below.

Direct Material.................................................................. $4

Direct labor....................................................................... 2

Variable cost..................................................................... 3

Fixed Cost

Depreciation .......................................................................3

CEO's Salary.....................................................................2

Supervisor's salary (directly connected with blower) ....................4Cost per unit$18

Required:

a.Should Barber purchase the blower outside or make it at his own.

b.List five ways that management can seek to relax a constraint by expanding the capacity of a bottleneck operation.