Question

Muar Fabrics Corporation manufactured 20,000 units of special multilayer fabric with the name Stailoo. The following standard costs were developed for Stailoo:

STANDARD COST CARD PER UNIT Direct materials: 6 meter x RM2 per meter RM12.00 Direct labor: 5 hours x RM3 per hour 15.00 Variable overhead: 5 hours x RM1 per hour 5.00 Fixed overhead: 5 hours x RM5 per hour 25.00 Total standard cost per unit RM57.00 The following information is available regarding the company's operations for the period: Materials purchased 130,000 meters at RM2.10 per meter Materials used 110,000 meter Direct labour 115,000 hours at RM3.25 per hour Overhead incurred: Variable RM112,500 Fixed RM440,000 Budgeted fixed overhead for the period is RM450,000, and the standard fixed overhead rate is based on the expected capacity of 90,000 direct labour hours. The materials price variance is computed at the time of purchase. Required: Calculate the following variances and indicate whether they are favourable or unfavourable.

a. Materials price and usage variances

b. Labour rate and efficiency variances

c. Variable overhead spending and efficiency variances

d. Fixed overhead spending and volume variances