Question
The Lubbock plant of Morrils Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard
The Lubbock plant of Morrils Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly is as follows:
Direct materials 6 kgs @ R50 R300.00
Direct labour 1.6 hrs @ R120 R192.00
Variable overheads 1.6 hrs @ R100 R160.00
Fixed overheads 1.6 hrs @ R60 R96.00
Standard unit cost
R748.00
During the year, the Lubbock plant had the following actual production activity: Production of motors totalled 50 000 units The company used 82 000 direct labour hours at a total cost of R10 660 000 Actual fixed overheads totalled R5 560 000 Actual variable overheads totalled R8 600 000 Direct materials purchased from Franks Hardware totalled R18 560 000 at R58 per kg, of this 20 000 kg is in closing inventory.
The Lubbock plants practical activity is 60 000 units per year. Standard overhead rates are calculated based on practical activity measured in standard direct labour hours.
Required:
2.2 Calculate all the production input variances.
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