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In: Accounting

Question 1 The following information is for Obaapa Ltd's July production:  Standards: Material: 3.0 feet per unit...

Question 1

The following information is for Obaapa Ltd's July production:  Standards: Material: 3.0 feet per unit @ GH¢4.20 per foot, Labour: 2.5 hours per unit @ GH¢7.50 per hour. Actual: Production: 2,750 units produced during the month, Material: 8,700 feet used; 9,000 feet purchased @ GH¢4.50 per foot, Labor: 7,000 direct labour hours @ GH¢7.90 per hour.  Determine the total material cost and total labour cost variance, separating them into their corresponding price and quantity variances. show all workings clearly

Question 2

Akyede Groups of Companies uses a standard cost system for its production process and applies overhead based on direct labour hours. The following information is available for May when Akyede produced 4,500 units: Standard: Direct labour hour per unit - 2.50, Variable overhead per direct labour hour - GH¢1.75, the fixed overhead per direct labour hour - GH¢3.10, Budgeted variable overhead - GH¢21,875, Budgeted fixed overhead - GH¢38,750. Actual: Direct labour hours - 10,000, Variable overhead- GH¢26,250, Fixed overhead- GH¢38,000. Calculate the total variable overhead cost and total fixed overhead cost variance, indicating the respective spending or expenditure variance and efficiency (volume) variance.

Solutions

Expert Solution

Answer :

Question no -1

Material Cost variance = Standard cost - Actual cost

= 2750* 3*4.2 - 8700*4.5

= 4500 Unfavorable

Material Price variance = (SP - AP)AQ used

= (4.2 - 4.5)*8700

= 2610 Unfavorable

Material price variance can be also calculated at the time of purchase.

Material price variance = (SP - AP)AQ Purchased

= (4.2 - 4.5 )*9000

= 2700 Unfavorable

Material Quantity Varince = (SQ - AQ )* SP

= (2750*3 - 8700 )*4.2

= 1890 Unfavorable

Labor cost Variance = Standard cost - Actual cost

= 2750*2.5*7.5 - 7000*7.9

= 3737.5 Unfavorable

Labor rate / price variance = (SR - AR )*AH

= (7.5- 7.9 )*7000

= 2800 Unfavorable

Labor Efficiency variance / Quantity Variance = (SH- AH )*SR

= (2750*2.5 - 7000)*7.5

= 937.5 Unfavorable

Question no -2

Variable OH cost variance = Standard cost - Actual cost

= 4500* 2.5*1.75 - 26250

= 6562.5 Unfavorable

Variable oh Spending variance = (SR- AR )*AH

= SR *AH - AR*AH

= 1.75* 10000- 26250

= 8750 Unfavorable

Variable oh Efficiency variance = (SH -AH )*SR

= (4500*2.5 - 10000)*1.75

= 2187.5 Favorable

Fixed oh cost variance = Absorbed Fixed oh - Actual fixed oh

= 4500*2.5*3.1 - 38000

= 3125 Unfavorable

Fixed oh Expenditure variance = Budgeted fixed oh - Actual fixed oh

= 38750- 38000 = 750 Favorable

Fixed oh Volume variance = Absorbed fixed oh - Budgeted fixed oh

= 4500*2.5*3.1 - 38750

= 3875 Unfavorable

ekkarill92 answered 1 year ago
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