In: Accounting
A company produces and sells one product only, Peperoni, the standard cost for one unit being as
Follows.
$
Direct material A – 10 kilograms at $20 per kg 200
Direct material B – 5 litres at $6 per litre 30
Direct wages – 5 hours at $6 per hour 30
Fixed production overhead 50
Total standard cost 310
The fixed overhead included in the standard cost is based on an expected monthly output of 900 units.
Fixed production overhead is absorbed on the basis of direct labour hours.
During March the actual results were as follows.
Production 800 units
Material A 7,800 kg used, costing $159,900
Material B 4,300 litres used, costing $23,650
Direct wages 4,200 hours worked for $24,150
Fixed production overhead $47,000
Required
(a) Calculate price and usage variances for each material. 5 Marks
(b) Calculate labour rate and efficiency variances. 5 Marks
(c) Calculate fixed production overhead expenditure and volume variances and then subdivide the
volume variance. 5 Marks
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