Standard Costing & Variance Analysis

Delic plc. is a manufacturer of cakes that makes a wide range of cakes. It operates a standard marginal cost accounting system. Given below, is information relating to one of its products, i.e. birthday cakes, which are made in one of the company departments:

Birthday cakes	Standard marginal product cost per unit ($)
Direct material (6 kgs at $4 per kg)	24
Direct labour (1 hour at $7 per hour)	7
Variable production overhead	3
total	34
Additional information Variable production overhead varies with direct labour hours of input Budgeted fixed production overhead per month is $100,000 Budgeted production for birthday cakes is 20,000 units per month Actual production and costs for one of the months were as follows: - Units of birthday cakes produced 18,500 units

$

Direct materials purchased and used, 113,500kg 442,650

Direct labour, 17,800 hours 129,940

Variable production overhead incurred 58,800

Fixed production overhead incurred 104,000

total 735,390

Required:

1. Prepare a statement showing, by cost elements (i.e. direct materials; direct labour; variable overhead; and fixed overhead), the:
   1. original budget
   2. flexed budget
   3. actual cost
   4. total variances
2. To be more informative for managerial purposes, prepare the following variances:
   1. Material price variance
   2. Material usage variance

(iii) Wage rate variance

1. Labour efficiency variance
2. Variable overhead expenditure variance

vi) Variable overhead efficiency variance