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Ocean Side Ltd uses a standard costing system and has developed the following standards for producing...

Ocean Side Ltd uses a standard costing system and has developed the following standards for producing small inflatable life rafts.

Direct materials

2.5 metres at $5 per metre

Direct labour

3.5 hours at $15 per hour

Variable overhead

$10 per direct labour hour

Fixed overhead

$5 per direct labour hour

Ocean Side produced 500 life rafts in the month of June. During June they purchased 2,000 metres of material at a cost of $12,000 and used 1,200 metres of material in production. They incurred 1,700 direct labour hours at $14 per hour. The overhead for June was $15,000 variable and $8,500 fixed. Ocean Side’s denominator volume of direct labour hours is 1,680 per month.

Ocean Side management has a policy of determining materials variances at the point of purchase.

Required:

Calculate all possible variances from the case facts given above. Label all variances and indicate whether they are favourable (F) or unfavourable (U).

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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