Tailor Inc. makes designer jeans. The company uses a standard costing system. The following information is available regarding the standard variable costs of producing one pair of jeans: Standard variable overhead cost per direct labour hour $6 Standard direct materials cost per metre $16 Total standard variable cost per pair of jeans $63 In June, 3,000 jeans were produced and sold. All materials purchases made in June were consumed in production. Selected information for June follows: Standard cost of direct labour to produce 3,000 pairs of jeans $48,000 Standard cost of variable manufacturing overhead to produce 3,000 pairs $9,600 Actual direct materials cost $130,000 Actual variable overhead cost $9,720 Actual direct labour hours 1,700 hours Total flexible budget materials variance $1,400 F Materials quantity variance $2,400 U Variable overhead rate variance $480 F Actual variable cost per pair produced $63.42 Required: a) Calculate the following for June: i. Standard cost of the materials required for June production (1 mark) ii. Standard direct labour rate per hour (2 marks) iii. Total actual direct labour cost incurred (3 marks) iv. Materials price variance (2 marks) V. Labour rate variance (2 marks) vi. Labour efficiency variance (2 marks) b) The purchasing manager and the production manager are waiting for the report on the June variances. Assume that the price, spending, and rate variances are all favourable, but that the quantity and efficiency variances are unfavourable. Briefly explain how the purchasing manager (1 mark) and the production manager (1 mark) will each interpret the June variances. Tailor Inc. makes designer jeans. The company uses a standard costing system. The following information is available regarding the standard variable costs of producing one pair of jeans: Standard variable overhead cost per direct labour hour $6 Standard direct materials cost per metre $16 Total standard variable cost per pair of jeans $63 In June, 3,000 jeans were produced and sold. All materials purchases made in June were consumed in production. Selected information for June follows: Standard cost of direct labour to produce 3,000 pairs of jeans $48,000 Standard cost of variable manufacturing overhead to produce 3,000 pairs $9,600 Actual direct materials cost $130,000 Actual variable overhead cost $9,720 Actual direct labour hours 1,700 hours Total flexible budget materials variance $1,400 F Materials quantity variance $2,400 U Variable overhead rate variance $480 F Actual variable cost per pair produced $63.42 Required: a) Calculate the following for June: i. Standard cost of the materials required for June production (1 mark) ii. Standard direct labour rate per hour (2 marks) iii. Total actual direct labour cost incurred (3 marks) iv. Materials price variance (2 marks) V. Labour rate variance (2 marks) vi. Labour efficiency variance (2 marks) b) The purchasing manager and the production manager are waiting for the report on the June variances. Assume that the price, spending, and rate variances are all favourable, but that the quantity and efficiency variances are unfavourable. Briefly explain how the purchasing manager (1 mark) and the production manager (1 mark) will each interpret the June variances
