Question
Stupendous Games developed a new play station called StupendouS. Stupendous Games has a standard cost system to help control its costs. The following standards have
Stupendous Games developed a new play station called StupendouS. Stupendous Games has a standard cost system to help control its costs. The following standards have been established for StupendouS. Direct materials 15 grams per StupendouS. Standard direct material cost per StupendouS is $11. Direct labour 1.2 hours per StupendouS. Standard cost of direct labour is $15.00 per StupendouS.
During October the company produced 9,000 StupendouS units. Production data for October are:
Direct materials: 165,000 grams were purchased at a cost of $115,000; 20,000 grams of this was still in inventory at the end of the month. Direct labour: 11,000 direct labour hours were worked at a cost of $142,500.
Required: Compute the following variances for October: a) Direct materials price and quantity variances. (6 marks) b) Direct labour rate and efficiency variances. (6 marks) c) Are the variances computed in (a) and (b) linked? Provide a brief commentary on the variances computed above, including explanations regarding the price and the quantity, and the rate and the efficiency variances. (6 marks)
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