Sales variances Lecture Example 3 H Morris Morris has the following budget and actual figures for year 4. Budget Actual 600 620 Sales units Selling price per unit $30 $29 Standard full cost of production = $28 per unit Requirement Calculate the selling price variance and the sales volume profit variance. 8 The standard time to produce 100 thingies is 200 hours. In one day 300 thingies were produced which required 640 hours of work and for which production were paid. The standard rate of pay is $6 per hour. Calculate the efficiency variance. 9 Actual production Standard hours per unit Standard wage rate Actual hours worked Actual hours paid Actual wage cost 462 units 10 hours $6.20 per hour 4,495 4,650 $29,065 Calculate the labour cost variances. Kallis Ltd. produces soap in bulk. The standard cost per drum is made up as follows: Raw materials 100 kg costing $2 per kg Labour 12 hours costing $6 per hour Fixed production overheads per month are budgeted at $93,600. For April 20X8, budgeted production was 7,800 drums. The actual costs incurred in the period were Raw materials (900,000 kg purchased) $1,755,000 Labour (110,000 hours paid, 102,000 worked) $641,000 Fixed production costs $86,000 During April 7,800 drums of soap were actually produced. There were no raw material stocks at the start or end of the period. Requirement Illustrate all of the resulting cost variances and reconcile actual and standard cost. (In order for the reconciliation to work, you will have to calculate an extra variance for the idle time i.e. cost up the paid, but unworked hours)