Question 2)

The standard costs and budget figures relating to production of Playfair's single product are: Direct material 2 kgs @ $7.25 per kg $ 14.50 Direct labour % of an hour @ $18 per hour $ 4.50 Factory Overhead $ 11.50 Standard Cost $ 30.50 Normal production: 12,000 units Budgeted fixed overhead: $60,000 Overhead is applied on the basis of standard direct labour hours. Actual data for the period: Production: 12,250 units Material purchased: 30,000 kgs @ $7.30 per kg Material issued to production: 24,515 kgs Direct labour cost: 3,064 hours @ $18.25 per hour Factory overhead: $139,420 ($62,000 fixed) Required a) Compute the following variances (show calculations), please refer to end of exam paper for supplied formulas: (i) Direct material price variance (ii) Direct material usage variance (ii) Direct labour rate variance (iv) Direct labour efficiency variance (v) Variable overhead spending variance (vi) Variable overhead efficiency variance (vii) Fixed overhead budget variance (vili) Fixed overhead volume variance b) Give one possible explanation for the direct variances computed in requirement (a)