Question 2

Ricardo (Pvt) Ltd manufactures a single product which a standard cost of $80 made up as follows:

Direct materials: $

15 square meters @ $3/m² 45

Direct labour 5 hours @ $4/hr. 20

Variable overheads 5hr @ $2/hr 10

Fixed overheads 5 hr @ $1/hr 5

$80

The standard selling price of the product is $100 per unit. The monthly budget projects production and sales of 1 000 units.

Actual figures for the month of April are as follows:

Sales 1 200 units at @ $102

Production 1 400 units

Direct materials 22 000m² at $4/m²

Direct wages 6 800 hours at $5

Variable overheads $11 000

Fixed overheads $6 000

Required calculate the following variance

1. Fixed overhead cost variance
2. Fixed overhead expenditure variance
3. Fixed overhead volume variance
4. Fixed overhead capacity variance and Fixed overhead efficiency variance