Question 7: Flexible budgets and variance analysis (8 Marks) Tim has asked his c

Question

Question 7: Flexible budgets and variance analysis (8 Marks) Tim has asked his company's financial controller to accumulate data on the sale of the company's roducts. The following data was gathered: Budgeted production and sales: 5,000 Actual production and sales: 6,000 The standard requires 1.5kg of material at a budgeted cost of $1.52 per kg and two hours of assembly time and testing time at a cost of $12.50 per hour. The product sells for $32 each Actual production costs for the 6,000 products totalled $12,900 for 8,600kg and $161,700 for . 13,200 labour hours equired: a) Calculate the material variances for Tim b) Calculate the labour variances for Tim

Explanation / Answer

Standard Actual Particulars Qty/ hours Rate amount Qty/ hours Rate amount Materials                   9,000.00                        1.52                 13,680.00                       8,600.00                1.50                 12,900.00 Labour                 12,000.00                 12.5000               150,000.00                     13,200.00             12.25               161,700.00 Actual output                   6,000.00 Materials reqd (6000*1.5)                   9,000.00 Labour hrs reqd (6000*2)                 12,000.00 Direct Material cost variance= Standard cost - Actual cost Direct Material cost variance= 13,680 - 12,900 Direct Material cost variance= 780 F DMPV = (SP-AP)*AQ purchased DMPV = (1.52 - 1.50)8600 DMPV = 172 F DMQV= (SQ-AQ)SP DMQV= (9000 - 8600)1.52 DMQV= 608 F Direct labour cost variance= Std Cost- Actual cost Direct labour cost variance= 150,000 - 161,700 Direct labour cost variance= 11,700 U DLRV= (SR-AR)AH DLRV= (12.50 - 12.25)13,200 DLRV= 3,300 F DLEV = (SH-AH)SR DLEV = (12000 - 13200)12.50 DLEV = 15,000 U

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