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Q 18 Rice Processors Plc uses a standard costing system. Fixed production overhead is absorbed on...

Q 18

Rice Processors Plc uses a standard costing system. Fixed production overhead is absorbed on the basis of direct labour hours. The following data relate to a particular period of operation

Standard price of material/kg                                             GHS5.90

Actual material issued to production                                 4,110kg

Standard labour hours                                                      1,680

Actual direct labour hours                                                 1,760

Actual fixed overhead                                                      GHS5,620

The following variance were calculated at the end of the period

                                                                                         GHS

Direct material cost                                                    702(A)

Direct material usage                                                 531(F)

Direct labour efficiency                                             336(A)

Direct labour cost                                                        16 (F)

Fixed overhead cost                                                    92(F)

Required

  1. Calculate:

i standard quantity of materials

ii actual price of materials per kg

iii standard direct labour rate

iv actual direct labour rate

  1. State two benefits to be obtained from the installation of a standard costing system

Solutions

Expert Solution

i) Direct Material Usage Variance = (Standard Usage - Actual Usage) x Standard Price
$     531.00 = (SU - 4110) x $ 5.90
$        90.00 = SU - 4110
SU = 4200
ii) Direct Material Price Variance = (Standard Price - Actual Price) x Actual Usage
$ -1,233.00 = ($ 5.90 - AP) x 4110
$        -0.30 = $ 5.90 - AP
AP = $      6.20
Workings:
Direct Material Cost Variance = Direct Material Price Variance + Direct Material Usage Variance
$    -702.00 = Direct Material Price Variance + 531
$ -1,233.00 = Direct Material Price Variance
iii) Direct Labor Cost Variance = Direct Labor Rate Variance + Direct Labor Efficiency Variance
$    16.00 = Direct Labor Rate Variance + (- 336)
$ 352.00 = Direct Labor Rate Variance
Direct Labor Efficiency Variance = (Standard Hours - Actual Hours) x Standard Rate
$ -336.00 = (1680 - 1760) x Standard Rate
$ -336.00 = -80 x Standard Rate
$       4.20 = Standard Rate
iv) Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours
$ 350.00 = ($ 4.20 - AR) x 1760
$       0.20 = $ 4.20 - AR
AR = $      4.00

ekkarill92 answered 1 year ago
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