The following information is to be used for the next three questions:
Downward Inc. manufactures and sells a product, Z30. The per unit standards for the direct costs of product Z30 are as follows:
- 2.8 kg of material at a cost of $12.50 per kg
- 0.60 direct labour hours at a direct labour rate of $35.00 per direct labour hour
During the year, Downward Inc. purchased and used 18,000 kg of material at a total cost of $193,500 to manufacture 5,000 units of Z30. This required 2,300 direct labour hours at a total cost of $87,400.
1.What is the price variance for direct materials?
a.$8,100 unfavourable
b.$4,500 unfavourable
c.$12,600 favourable
d.None of the above
2.The labour efficiency variance for the year is:
a.$6,900 favourable
b.$31,400 favourable
c.$17,600 favourable
d. $24,500 favourable
3.A customer asks Downward to bid for an order of 900 units of Z30. Downward applies manufacturing support costs at rate of 120% of the direct labour cost and applies a markup of 60% of direct costs. Assuming Downward does not know what the actual costs are going to be, Downward's bid for the total order would be:
a. $103,320
b.$116,928
c. $84,420
d.$98,028