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Yellow Limited makes and sells a single product 'Jay' for which the standard cost is as follows: Direct material 4 kg. at $12 per kg
Yellow Limited makes and sells a single product 'Jay' for which the standard cost is as follows: Direct material 4 kg. at $12 per kg 48.00 Direct labor 5 hrs. at $7.00 per hr. 35.00 Variable production overhead 5 hours at $2 per hr. 10.00 Fixed production overhead 5 hrs. at $10.00 per hr. 50.00 Total 143.00 The variable overhead is deemed to vary with the hours worked. Overhead is absorbed into production on the basis of standard hours of production and the normal volume of production for the period just ended was 18,000 units. For the period under consideration, the actual results were: $ Direct material used- 76,000kg. at a cost 836,000 Direct labor cost incurred-for 84,000 hrs. worked 604,800 Variable production overhead 172,000 Fixed production overhead incurred 1,030,000 Production units 18,000 units Required: a. Calculate the standard cost for the output for the period by element of cost. (4 MARKS) b. Calculate following variances, 1. Direct material price variance 2. Direct material usage variance 3. Total direct material cost variance 4. Direct labour rate variance 5. Direct labour efficiency variance 6. Total direct labour cost variance (12 MARKS) c. Briefly comment based on the usefulness of the above statement to management. (9 MARKS)
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