Question 6

A) The Alpine Group, Inc. provides the following data for the June 2018,when 15,000 units are manufactured:

Standard Material Cost (Per Unit)8.50 Kg @ $7.50 / Kg

Actual Material Cost (Per Unit)6.75 Kg @ $13.5 / Kg

Standard Labour Cost (Per Unit)5.5 hrs @ $15 / Hr

Actual Labour Cost (Per Unit)6.5 hrs @ $12.2 / Hr

a. Calculate:

Direct Material Price Variance

Direct Material Quantity/Usage Variance

Total Material Cost Variance

Direct Labour Rate Variance

Direct labour Efficiency variance

Total Labour Cost Variance

b. Calculate variable overhead spending variance if actual labour hours used are 260, standard variable overhead rate is $10.40 per direct labour hour and actual variable overhead rate is $9.30 per direct labour hour. Also specify whether the variance is favourable or unfavourable

c. Calculate the variable overhead efficiency variance using the following figures:

Number of Units Produced

620

Standard Direct Labour Hours Per Unit

0.2

Actual Direct Labour Hours Used

260

Standard Variable Overhead Rate

$10.40

B) Variance analysis is especially effective when you review the amount of a variance on a trend line, so that sudden changes in the variance level from month to month are more readily apparent. Variance analysis also involves the investigation of these differences, so that the outcome is a statement of the difference from expectations, and an interpretation of why the variance occurred.

Define the term "Variances Analysis" and also highlight the Advantages and Disadvantages of Variances.