REQUIRED:

Briefly comment on the information provided about the departments performance by the variance analysis.

As a newly employed management accountant of Difficult Times Limited, you have been assigned the task of assessing the performance of a division within the company. The division, which is a major production centre, uses standard absorption costing for product costing and stock valuation purposes. The cost card for the product line where you intend to start your assessment shows the following data: E Direct materials 105 Quantity 10 kgs 30 minutes 45 minutes Direct labour -Category A 15 Category B 9 Variable overheads 20% of material 21 Fixed overheads (note) 30 minutes @ E12 per hour 6 Standard absorption cost 156 Note: Fixed production overheads are absorbed on the basis of standard time allowed for Category A labour. The monthly budget for Category A labour was 2,500 hours. In the most recent month, 4,977 units were made at the following costs: E Direct materials - Purchased 555,600 - Used 55,000 kgs 52,350 kgs 2,610 hours Direct labour Category A 77,648 Category B 3,730 hours 45,000 114,925 Variable overheads Fixed overheads 29,055