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Question 4 20 marks Forest Company has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is
Question 4 20 marks Forest Company has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labour- hours. Inputs Direct materials Direct labour Variable manufacturing overhead Standard Quantity or Hours per Unit of Output 8.0 grams 0.60 hours 0.60 hours Standard Price or Rate $ 6.10 per gram $ 19.80 per hour $ 4.40 per hour The company has reported the following actual results for the product for April: Actual output Raw materials purchased Actual cost of raw materials purchased Raw materials used in production Actual direct labour-hours Actual direct labour cost Actual variable overhead cost 5,600 units 48,200 grams $279,560 44,810 grams 3,150 hours $ 64,890 $ 12,915 Required (show your calculations): a. Compute the materials price variance for April. Mention one potential reason for the variance result. (3 marks) b. Compute the materials quantity variance for April. Mention one potential reason for the variance result. (3 marks) c. Compute the labour rate variance for April. Mention one potential reason for the variance result. (3 marks) d. Compute the labour efficiency variance for April. Mention one potential reason for the variance result. (3 marks) e. Compute the variable overhead efficiency variance for April. Mention one potential reason for the variance result. (3 marks) f. If demand is insufficient to keep everyone busy and workers are not laid off, an unfavourable (U) variable overhead efficiency variance often will be a result unless managers build excessive inventories. Do you agree with this statement? Explain and justify your
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