Question 7 (12 marks) Bright Electric Company Limited manufactures electric table lamps The standard cost specification sheet of the company shows the following information related to its standard costs that have been set for its new model called Slim Line Elegance as: $14.00 $12.00 Direct materials (1 kg) Direct labour (2 hours) Overhead: Fixed - $1.10 per direct labour hour Variable - $1.30 per direct labour hour $2.20 $ 30.80 Actual production and cost information for December 2018 is as follows: Actual direct materials purchased Actual direct materials issued Actual output Actual cost of materials purchased Actual direct labour rate Actual direct labour hours 2,046 kilograms 1,760 kilograms 1,800 units $31,290 $8 per hour 5,300 hours $5830 Budgeted fixed OH Actual overhead costs: Fixed OH Variable OH $6,000 $6,600 Required: Calculate the following variances for the month of December. (i) Direct material price variance. (1 mark) (ii) Direct material quantity variance. (1 mark) (iii) Direct labour rate variance. (1 mark) (iv) Direct labour efficiency variance. (1 mark) (v) Variable overhead spending variance, (1 mark) (vi) Variable overhead efficiency variance. (1 mark) (vii) Fixed overhead budget and volume variances. (3 marks) (viii) Favourable variances are good news and therefore require no investigation, whereas unfavourable variances are bad news and do require investigation. Do you agree? 28