Question

In: Accounting

The standard cost for material and labour in a manufacturing process is provided per unit as:...

  1. The standard cost for material and labour in a manufacturing process is provided per unit as:

Material cost 5kgs                         shs.50

Labour cost 20hours                     shs.10

Material consumed in producing 500 units was Shs.25,650 against 2,700kgs of material. Wages paid was Sh6,050 for 11,600 hours, including 20 hours which was idle time due to machine breakdown.

Required:

  1. Material cost variance
  2. Material price variance
  3. Material usage variance
  4. Labour cost variance
  5. Labour rate variance

Solutions

Expert Solution

a. Material cost variance = 1,350 - 2,000
= 650 U
b. Material price variance = (Actual price – Standard price) x Actual quantity purchased
= (9.5 - 10) X 2,700
=                                   1,350 F
c. Material usage variance = (Actual qty – Standard qty allowed) x Standard price
= (2,700 - 2,500) x 10
=                              2,000.00 U
d. Labour cost variance = 250 + 790 + 10
=                                   1,050 U
e. Labour rate variance = (Actual rate – Standard rate) x Actual hours worked
= 6,050 - 0.50 x 11,600
= 250 U
f Labour efficiency variance = (Actual DL hours – Standard DL hours) x Standard DL rate per hour
= (11,580 - 10,000) x 0.50
= 790 U
h Idle Time Variance = Abnormal Idle Time x Standard Rate
= 20 x 0.50
= 10 U
Working
Actual price per unit = 25,650 / 2,700 kgs
= 9.5
Standard price per unit = 50 / 5 kgs
= 10
Actual labor rate per hour = 6,050 / 11,600
0.52155
Standard labor rate per hour = 10 / 20 hours
0.5

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