A taylor, clothing manufacturers have appionted you as their management accountant. You are anxious to prove yourself to the company and feel you can make a valuable contribution to the new system of standard costing set up by the company.
The following information is for a four week period.
Direct materials
Purchases: material A 100,000 metres for £317,500
material B 50,000 metres for £210,000
Used : Material A 9,600 meters res
Material B 3,600 meters res
Direct labour
Actual hours worked Wages paid £
Cutting department 6000 23,600
Overlocking department 4,800 26,500
Budgeted normal capacity expressed in direct labour hours
cutting deparment partment 6,800
Overlocking department 5,200
Additional information
Standard cost for 1 unit of finished product
quantity price
£ £
Direct material A 20m 6.5 130
Direct material B 10m 8 80
Direct wages cutting 16 hours 8 64
Direct wages overlocking 10 hours 10 50
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Material price variance is extracted at the time of receipt of materials 800 goods were produced in the period. you are required to : A calculate price and usage variances for direct materials A and materials B.
B calculate the rate and efficiency variances for the direct labour employed in depatments 1 and 2.
C suggest a possiable reason for each variance shown i A and B. n in A and B.
D calculate for cutting and overlocking departments :
i Production volume ratio
ii Efficiency ratio