Question 3 20 marks) Pastic Corporation makes a product with the following stand

Question

Question 3 20 marks) Pastic Corporation makes a product with the following standard costs: Standard Cost Per Unit Standard Quantity or Hours 6.9 liters 0.3 hours 0.3 hours Inputs Standard Price or Rate Direct Materials Direct Labour Variable Overhead s 5.00 per liter $17.00 per hour $34.50 $ 5.10 S 6.00 per hourS 1.80 The company reported the following results concerning this product in August. Originally budgeted output Actual output Raw materials used in production Actual direct labour hours Purchase of raw materials Actual price of raw material 8,600 units 8,400 units 58,330 liters 2,310 hours 62,500 liters s 4.90 per liter S17.10 per hour s 5.50 per hour Actual direct labour rate Actual variable overhead rate The materials price variance is recognized when materials are purchased. Variable overhead is applied on the basis of direct labour-hours. Required: Show all calculations and formulas and present your work in good form. (a) Compute the materials price variance (b) Compute the materials quantity variance. (c) Compute the labour rate variance. (d) (3% marks) (3% marks) (3% marks) (3% marks) Compute the direct labour efficiency variance (e) Compute the variable overhead rate variance () Compute the variable overhead efficiency variance. . (3 marks) (3 marks)

Explanation / Answer

Std Actual Qty/HRS Rate Value Qty/HRS Rate Value Material        43,000              6.9           2,96,700        58,330           4.90          2,85,817 Labor           2,580         17.00              43,860           2,310         17.10              39,501 Ohs           2,580           6.00              15,480           2,310           5.50              12,705 Total Material variance=Std Value*Actual value=296700-285817              10,883 (Favourable) Material Price Variance=SQ*(SR-AR) =43000*(6.9-4.9)              86,000 (favourable) Material qty Variance=AR*(SQ-AQ) =4.9*(43000-58330)            -75,117 (Unfavourable) Total Labor variance=Std Value*Actual value=43860-39501                4,359 (Favourable) Labor rate Variance=SQ*(SR-AR) =2580*(17-17.10)                  -258 (Unfavourable) Labor efficency Variance=AR*(SQ-AQ) =17.10*(2580-2310)                4,617 (Favourable) Total variable ohs variance=Std Value*Actual value=15480-12705                2,775 (Favourable) Variable Ohs rate Variance=SQ*(SR-AR) =2580*(6-5.5)                1,290 (Favourable) Variable OHS efficency Variance=AR*(SQ-AQ) =5.5*(2580-2310)                1,485 (Favourable)

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