Question
Waterways Continuing Problem 12 At the end of June the manager of the B.C. manufacturing plant was provided with the following variance analysis report: Budget
Waterways Continuing Problem 12
At the end of June the manager of the B.C. manufacturing plant was provided with the following variance analysis report:
| Budget | Actual | Variance | Favourable (F)/ Unfavourable (U) | |||||
| Production in units | 302,000 | 319,000 | 17,000 | F | ||||
| Production costs: | ||||||||
| Direct material | $507,360 | $522,480 | $(15,120) | U | ||||
| Direct labour | 1,283,500 | 1,323,000 | (39,500) | U | ||||
| Variable overhead costs | 90,600 | 94,501 | (3,901) | U | ||||
| Fixed overhead costs | 151,000 | 145,945 | 5,055 | F | ||||
| Total production costs | $2,032,460 | $2,085,926 | $(53,466) | U |
The manager immediately called the production supervisor, demanding an explanation for the large unfavourable variance for the quarter. The production supervisor was puzzled. He thought the cost-cutting measures they had incorporated were beginning to work. He certainly wasnt expecting such a large discrepancy. The standard rates the plant was using with its normal costing system are summarized below.
| Volume | Cost | |||||
| Direct material | 1.40 | kg per unit | $1.20 | per kg | ||
| Direct labour | 0.25 | hour per unit | $17.00 | per hour | ||
| Predetermined overhead rate: | ||||||
| Variable | 0.25 | hour per unit | $1.20 | per hour | ||
| Fixed | 0.25 | hour per unit | $2.00 | per hour | ||
Other relevant information:
| 1. | A total of 454,000 kg of direct materials were purchased during the quarter at a cost of $1.30 per kilogram. | |
| 2. | A total of 435,400 kg of direct materials were used in production to manufacture 319,000 units. | |
| 3. | Payroll recorded 78,750 direct labour hours at an average cost of $16.80 per hour. |
Calculate the following production variances.( Need the amount and if its F, U or Neither Favourable/Unfavourable
| Material price variance | $ | FavourableNeither favourable nor unfavourableUnfavourable | |
| Material quantity variance | $ | UnfavourableNeither favourable nor unfavourableFavourable | |
| Labour price variance | $ | FavourableNeither favourable nor unfavourableUnfavourable | |
| Labour efficiency variance | $ | FavourableUnfavourableNeither favourable nor unfavourable | |
| Variable overhead variance | $ | UnfavourableFavourableNeither favourable nor unfavourable |
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Cima Official Exam Practice Kit Test Of Professional Competence In Management Accounting 2008 Edition
Authors: Geoffrey Little
4th Edition
0750686804, 978-0750686808
