QUESTION 3

1. Pearson Inc. provides the following information:

i. Standard Material Cost (Per Unit) 7.40 Kg @ $ 10 / Kg

2. Actual Material Cost (Per Unit) 6.80 Kg @ $ 12 / Kg

3. Standard Labour Cost (Per Unit) 3.50 hr @ $10.5 / Hr iv Actual Labour Cost (Per Unit) 2.90 Hr @ $12.8 / Hr

1000 Units were manufactured.

Calculate: (12 Marks)

1. Direct Material Price Variance
2. Direct Material Quantity/Usage Variance
3. Total Material Cost Variance
4. Direct Labour Rate Variance
5. Direct labour Efficiency variance
6. Total Labour Cost Variance

2. Calculate variable overhead spending variance if actual labour hours used are 260, standard variable overhead rate is $19.30 per direct labour hour and actual variable overhead rate is $13.30 per direct labour hour. Also specify whether the variance is favorable or unfavorable. (3 marks)
3. Explain the importance of standard Costing. (5 Marks) (300 words)