Question

Material A: 3 kilograms at R20 per kilogram

Material B: 5 kilograms at R15 per kilogram

Direct labour: 8 hours at R10 per hour

Fixed overheads: R120 000

Budgeted production: 9000 units

Actual results for February 2019 were as follows:

Material A: 32 500 kg at R22 per kilogram

Material B: 54 000 kg at R14 per kilogram

Direct labour: 88 000 hours at R12 per hour

Fixed overheads: R132 000

Production: 10 000 units

REQUIRED: Calculate the following:

1.1.1 Material mix variance (6)

1.1.2 Material yield variance (6)

1.1.3 Fixed manufacturing overheads volume capacity variance (3)

1.1.4 Fixed manufacturing overheads volume efficiency variance (2)

Answer 1

Given Information

SQ=Material A: 3 kilograms at SP=R20 per kilogram

SQ=Material B: 5 kilograms at SP=R15 per kilogram

SH=Direct labour: 8 hours at SR= R10 per hour

Budgeted Fixed overheads: BFOH=R120 000

Budgeted production: 9000 units

Actual results for February 2019 were as follows:

AQ=Material A: 32 500 kg at AP=R22 per kilogram

AQ=Material B: 54 000 kg at AP=R14 per kilogram

AH=Direct labour: 88 000 hours at AR=R12 per hour

Actual Fixed overheads: AFOH=R132 000

Actual Production= 10000 units

Calculation of RAQ i.e Actual quantity rewritten in Standard Proportion

Material	Actual Quantity	Standard Proportion	RAQ i.e Revised Actual Quantity
A	32500	3 ./8	86500*3/8=32437.5
B	54000	5./8	86500*3/8=54062.5
	86500		86500

Particulars	SQ XSP	RAQXSP	AQXSP
Material A	10000* 3*20=600,000	32437.5*20=648,750	32500*20=650,000
Material B	10000*5*15=750,000	54062.5*15=810937.5	54000*15=810,000
Total	1,350,000	1,459,687.50	1,460,000

Calculation of Material Mix variance=RAQ XSP- AQ XSP

=1,459,687.50 -1,460,000

=312.5 Adverse

Calculation of Material Yield Variance=SQXSP-RAQ XSP

=1,350,000 - 1,459,687.50

=109,687.5 Adverse

Calculation of PFOH=BFOH * AH/BH

PFOH= 120000*88000 hrs /( 9000 units* 8 hours)

PFOH= 146,666.67

Calculation of Fixed Overhead SR per hour=120,000 / (9000 units *8 hours)= R1.67 per hour

Calculation of Fixed Overhead Capacity Variance=AH XSR-PFOH

=88,000 X1.67 -146,666.67

=R293.33 Favorable

Calculation of Fixed Overhead Efficiency variance=SH XSR- AH XSR

=(10,000 * 8 hours) X R1.67 - 88,000 X R1.67

=133,600-146,960

=R 13,360 Adverse

Please feel free to reach or comment back if you need further clarity or something is missing.