Task 2a: CLO3

Question

Razi Company is a leather belt manufacturer based in Kelang, Selangor. For the most recent period, the company estimated 400 units of production. The following are the standard unit costs:

Leather Belt	Standard cost per unit ($)
Direct material (2m at $1.50 per meter) Direct labour (1.5 hours at $6 per hour) Variable production overhead (1.5 hours at $3.40)	3.00 9.00 5.10
	17.10

The budgeted and actual units produced for this period were 400 units. The costs incurred per unit are as follows.

Leather Belt	Actual cost per unit ($)
Direct material (2.1m at $1.60 per meter) Direct labour (1.4 hours at $6.50 per hour) Variable production overhead (1.4hours at $3.10)	3.36 9.10 4.34
	16.80

Required:

Calculate the following variances based on the information provided and indicate whether they are Favourable (F) or Unfavourable(U). Explain the reasons for each of the variations that occurred.

1. Material price variance 4 marks)
2. Material usage variance 4 marks)
3. Direct labour rate variance 4 marks)
4. Direct labour efficiency variance 4 marks)
5. Variable overhead spending variance 4 marks)
6. Variable overhead efficiency variance 4 marks)

(Total 24 marks)