Question

Helen has been using a standard cost system developed by Good Numbers and calculates the standard cost of a completed pair of RTW jeans as $72.00, as follows:

	Quantity	Price $	Unit	Cost per pair of jeans $
Denim fabric meters	2	10	/metre	20.00
Direct labour hours	2	20	/hour	40.00
Variable factory overhead	0.4	10	/hour	4.00
Fixed factory overhead	0.4	20	/hour	8.00
Total standard cost				72.00

The fixed overhead rate is based on an estimated 600 units per month. Direct labour is nearly a fixed cost in this business. Selling and administrative costs are $4500 per month plus $2 per pair of jeans sold. The following information is for production during April:

		Units
Number of pairs of jeans made	565	Jeans
Purchase of 1200 metres of denim	13,200	metres
Number of metres used	1,150	metres
Direct labour costs (1200 hours)	24,500	$
Variable factory overhead costs	2,750	$
Fixed factory overhead costs	4,020	$
Selling and administrative costs	3,770	$

Divine Denim’s policy is to record materials price variances at the time materials are purchased. Use a spreadsheet to perform calculations.

Required:

As an accountant working for Good Numbers use a spreadsheet to:

1. prepare a flexible cost budget for the month of April.
2. calculate all common direct cost variances.
3. calculate all common factory overhead variances.
4. calculate a total variance for the selling and administrative costs.
5. prepare a production cost variance report for April.
6. prepare a report that sums all the variances necessary to prepare the reconciling journal entry at the end of the period.

please provide a complete, clear answers for this. I am stuck with this question. help me.

many thanks  

Answer 1

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