Question 3

The standard production costs per unit of a companys single product in a period were:

Direct materials

RM

M01

6 kg at RM3 per kg

18.00

M02

4 meters at RM2 per meter

8.00

Direct labour

Grade A

4 hours at RM8 per hour

32.00

Grade B

2 hours at RM10 per hour

20.00

Fixed overheads

22.00

100.00

Budgeted production for this period was 1, 100 units.

Actual production and costs relating to this period were as follows:

Production 1, 200 units

Direct materials

Purchases:

M01

7, 320 kg purchased at a total cost of RM22, 960

M02

4, 680 meters purchase at a total cost of RM9, 160

Issues to production

M01

7, 100 kg

M02

4, 600 meters

Direct labour

Grade A

4, 750 hours worked at a total cost of RM37, 500

Grade B

2, 500 hours worked at a total cost of RM26, 500

Fixed production overheads incurred: RM24, 000

At the beginning of the period, the following quantities of raw material were in stock:

M01

200kg

M02

120 meters

There were no stocks of work-in-progress at the beginning or end of the period.3

The companys policy is to extract price variances at the time of purchase.

Required:

For the period, calculate the total variances:

(i)

Direct material price and usage (for each type of raw material)

(ii)

Direct labour rate and efficiency (for each grade of labour)

(iii) Fixed overhead expenditure