Question
Telso Sdn Bhd manufactures small battery units which are installed in motorcycles to provide electrical power for the lights installed on motorcycles. The standard unit
Telso Sdn Bhd manufactures small battery units which are installed in motorcycles to provide electrical power for the lights installed on motorcycles. The standard unit cost for each battery is as follows:
Battery Unit: RM | ||
Raw materials | 25kg @ 0.80 per kg | 20.00 |
Direct Labour | 3 hours @ RM 12.00 per hour | 36.00 |
|
|
|
Indirect Costs: |
|
|
Variable overhead cost | 3 hours @ RM 2.00 per hour | 6.00 |
Fixed overhead cost | 3 hours @ RM 1.00 per hour | 3.00 |
Total |
| 65.00 |
During July,400 battery units were manufactured at the costs shown below. There was no opening stock
Material purchased | 12,500 kg @ 0.88 per kg | RM 11,000 |
Material Used |
| 9,500 kg |
Direct Labour | 1,100 hours @ RM 11.80 | RM 12,980 |
Indirect Costs: |
|
|
Variable overhead cost |
| RM 2,600 |
Fixed overhead cost |
| RM 1,420 |
The flexible budget for this Company required 1,400 direct labour-hours of operation at the monthly activity level used to set the fixed overhead rate.
Required:
Calculate the following variances, indicating whether each is favourable or unfavourable:
- Direct material price and efficiency variance
- Direct manufacturing labour rate and efficiency variance
- Variable overhead spending and efficiency variance
- Fixed overhead spending and volume variance
- Reconcile the standard and actual cost of production.
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