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Question 2: a) Pink Ltd uses an integrated standard costing system. You are presented with the following information for December 2020. Standard cost for Product

Question 2:

a) Pink Ltd uses an integrated standard costing system. You are presented with the following information for December 2020.

Standard cost for Product 52

Direct material

7 kg at $11 per kg

Direct labour

18 hours at $20 per hour

Variable overhead

$8 per machine hour

Budgeted quantity of machine hours

20 hours per unit

Budgeted monthly fixed overhead

$1,600,000

(applied to products based on machine hours)

Budgeted production

20,000 units

Actual events

Units produced

21,500 units

Material transferred to production

152,500 kg

Material purchased

150,000 kg costing $1,590,000

Direct labour

397,750 hours costing $7,557,250

Actual variable overhead cost

$3,472,250

Actual fixed manufacturing overhead cost

$1,700,000

Actual machine hours recorded

408,500

Tasks

Calculate the following variances for December. Your answers should clearly indicate whether variances are favourable or unfavourable. Your answers should also include an explanation of a variance or possible causes of a variance where indicated.

  1. Direct material quantity variance

(your answer should also include two possible causes for this variance).

  1. Direct labour efficiency variance

(your answer should also include two possible causes for this variance).

  1. Variable overhead efficiency variance

(your answer should also include an explanation of this variance).

  1. Fixed overhead volume variance

(your answer should also include two possible causes of this variance).

  1. Fixed overhead budget variance

(your answer should also include two possible causes of this variance).

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