Question 2 (20 marks)

Part A

Bedok Curtains makes and hangs curtains. A particular window requires the following standard amounts:

Direct materials: 10 square metres at $5 per metre Direct labour: 5 hours at $10 per hour

During the second quarter Bedok made 1,500 curtains and used 14,000 square metres of material costing $68,600. Direct labour totalled 7,600 hours for $79,800.

Required:

1. Compute the direct materials price and efficiency variances for the quarter. (3 marks)
2. Compute the direct labour price and efficiency variances for the quarter. (3 marks)
3. Discuss the options Bedok has for computing the materials price variance, assuming Bedok had purchased 20,000 square metres of direct materials. (6 marks)

Part B

Swiss Company makes large decorative clocks. The budgeted fixed overhead costs for 2020 totalled $27,000. The company uses direct labour hours for fixed overhead allocation and anticipated it would use 900 hours during 2020 to make 45,000 clocks.

The actual number of clocks produced in 2020 was 48,000 and they required 960 labour hours to make. Actual spending on fixed overheads was $28,000.

Required:

1. Compute the fixed overhead spending variance. (4 marks)
2. Compute the production volume variance. (4 marks)