QUESTION 1 You are presented with the following information for Busra Bhd.: Dire

Question

QUESTION 1 You are presented with the following information for Busra Bhd.: Direct material: Standard price per unit Standard quantity for actual production Actual price per unit Actual quantity RM50 5 units RM52 6 units Direct labour: Actual hours Actual wage rate per hour Standard hours for actual production Standard wage rate per hour 10,000 RM6.50 9,000 RM6 a) You are required to calculate: i. Total material variance ii. Material price variance iii. Material quantity variance iv. Total labour variance V. Labour price variance Labour quantity variance (20 marks) b) Explain Two (2) advantages of using standard costing system, (5 marks) (TOTAL: 25 MARKS]

Explanation / Answer

a) Answer Formula Total material variance 62 =6*52-50*5 U Material price variance 12 =(52-50)*6 U Material quality variance 50 =(6-5)*50 U Total labor variance 11000 =10000*6.5-9000*6 U Labor price variance 4500 =(6.5-6)*9000 U Labor rate variance 6500 =(10000-9000)*6.5 U b) 1) It helps identify real reason of variances helping management to take prompt decision. 2) Standards set provides benchmark against which actual costs are compared to ascertain inefficiencies.

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