Question

Question 1

A company manufactures a single product for which the standard variable cost is:

                                                                         K per unit

Direct material: 81 kg x K7 per kg                            567

Direct labour:    97 hours x K8 per hour                   776

Variable overhead: 97 hours x K3 per hour              291

                                                                               1,634

Budget

Sales and production volume                   81,600 units

Standard selling price                               K59 per unit

Standard variable cost                             K24 per unit

During January, 530 units were produced and the costs incurred were as follows:

Direct material: 42,845 kg purchased and used; cost K308,484

Direct labour: 51,380 hours worked; cost K400,764

Variable overhead: cost K156,709

Actual results

Sales and production volume                     82,400 units

Actual selling price                                     K57 per unit

Actual variable cost                                    K23 per unit

Required:

(a) Calculate the following variances

1. Direct material total variance
2. Direct labour rate variance
3. Direct labour efficiency variance
4. Sales price variance
5. Sales volume contribution variance                                                                                                                                                         

(b) Discuss the three (3) Performance Levels in Standard Costing                                                                                                      

(c) Discuss three (3) criticisms levelled against the appropriateness of Standard Costing in the Modern Environment

                                                                                                               

Answer 1