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Grandma's Attic Company produces soft pillows made from goose down. The company uses a standard cost...

Grandma's Attic Company produces soft pillows made from goose down. The company uses a standard cost system and has set the following standards for materials and labour for each pillow:
Feathers from 5 large white geese (5 geese @ R5) R25
Fabric to make pillowcases (3 metres @ R2) R6
Direct labour (5 hours @ R8) R40
Total prime cost R71
During the month, the company produced 1000 goose down pillows. Actual geese purchased were 5100, at R4 per goose. Actual fabric purchased was 2900 metres at R2.10 per metre. There was no beginning or ending inventory of geese or fabric. Actual direct labour was 5200 hours at R7.75 per hour.
Required
1. Determine the total materials price variance and whether it is favourable or unfavourable. (5)
2. Determine the total materials usage variance and whether it is favourable or unfavourable. (5)
3. Determine the labour rate variance and whether it is favourable or unfavourable. (3)
4. Determine the labour efficiency variance and whether it is favourable or unfavourable.

Solutions

Expert Solution

1. Determine the total materials price variance and whether it is favourable or unfavourable. (5)

Materials price variance for Geese

= (AP - SP)*AQ

= ($4.00 - $5.00)*5,100

= $5,100 favourable

Materials price variance for Fabric

= ($2.10 - $2.00)2,900

= $290 unfavourable

Total materials price variance = $5,100 - $290 = $4,810 F

2. Determine the total Materials usage variance and whether it is favourable or unfavourable.

Materials usage variance for Geese= (AQ - SQ)SP

= (5,100 - 5,000)$5= $500 unfavourable

Materials usage variance for Fabric= (2,900 - 3,000)$2= $200 F

Total Materials usage variance= $500 U - $200 F = $300 unfavourable

3. Determine the labour rate variance and whether it is favourable or unfavourable. (3)
= (AR - SR)AH

= ($7.75 - $8.00)5,200

= $1,300 favourable

4. Determine the labour efficiency variance and whether it is favourable or unfavourable.

= (AH - SH)SR

= (5,200 - 5,000)$8.00

= $1,600 unfavourable

ekkarill92 answered 5 months ago
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