Question 6(25 Marks)

The Everglow Paints Company produces paint in its Barbadian plant. The standard cost card for a pail 5 kg of direct materials and 10 hours of direct labor are required for each unit. Both fixed and variable manufacturing overhead is applied on the basis of direct labour hours. The following information is available from the accounting records.

There was no beginning inventory of direct materials. Actual cost of 95,000 kg of direct material purchased was $1,733,750. The actual cost of the material was $1.25 higher than was budgeted per unit. The ending inventory of material was 15,000 kg. The Direct material efficiency variance is $85,000F. The actual labor cost for the production of paint was $2,160,000. The standard cost of labor for the units produced is $2,125,000. The actual cost of labour was $0.50 lower than the standard cost per hour. Actual variable overhead cost incurred is $403,620. The standard variable overhead applied to WIP is $408,000 and the fixed overhead applied to WIP was $612,000. The actual fixed overhead cost was $650,000 and the fixed overhead Spending variance was $2,000U. If the company had been using a normal costing system, $396,000 would have been the variable overhead allocated to the WIP.

Required

Based on the above information, calculate the following:

a.) Calculate the actual price per kg of material. (1Mark) b). Calculate the materials price variance. (2Marks) c). Actual quantity of output produced. (2Marks) d). Direct materials quantity variance (2Marks) e). Variable overhead efficiency variance (2Marks) f). Variable overhead spending variance. (2Marks) g). Direct labor rate variance (2Marks) h). Direct labor efficiency variance. (2Marks) i). Flexible budget fixed overhead costs. (2Marks) j). Budgeted fixed overhead application rate. (2Marks) k). Denominator level of activity (2Marks) l). Calculate and interpret the production volume variance. (4Marks)