Question

Q2. (25 marks) Granville Ltd's standard and actual costs per unit for the most recent period, during which 400 units were actually produced, are given below: Actual $3.36 Standard Materials: Standard: 2 metres at $1.50 per m. $3.00 Actual: 2.1 metres at $1.60 per m. Direct labour: Standard: 1.5 hrs. at $6.00 per hr. 9.00 Actual: 1.4 hrs. at $6.50 per hr. Variable overhead: Standard: 1.5 hrs. at $3.40 per hr. 5.10 Actual: 1.4 hrs. at $3.10 per hr. Total unit cost $17.19 There were no inventory of materials at the beginning or end of the period. 9.10 4.34 $16.80 Required: From the above information, compute the following variances. Show whether the variance is favourable (F) or unfavourable (U) with calculations: a) Materials price variance b) Materials quantity variance c) Direct labour rate variance d) Direct labour efficiency variance e) Variable overhead spending variance

Answer 1

Required: 20 Materials price varianu = AQ XSP - AQXAP AQ = 2.1 metres x 400 units = 840 Sp = $1.50 perm. AP = $1.60 perm. Material pro various = AQ XS p - AQUAP (840x91.50) - (840x91-60) $1260 - $ 1344 Required. b) Material quantity Vonion : SOXSP - AQXSP 30 = 2 metresx 4ouunits - 800 Sp = $1.50 peom. AQ=840 Mateñal quantity SOX SP-AQXSP Variame (800x 51-50) - (840x5)-50) $ 1200 - $1260 = 60 (0)

Required. () Direct la bourrote varion = AH XSR - AH XAR A = 1. Chnx40o= 560. SR= $6.00 perty AR= $6.50 perto Direct labour rate variam . AHASR-AHXAR (560* $6) - (560x & 6.50) $3360- $3640 11 $ 280 (0)

Required. d) Diree labour efficienty vanime = SHXSR - AHXSR SH= 1.5hs x 400 = 600 SR= $6.0uperar AH = 1.4 hos x u00=560 Direct labour Efficiency llaram = SHASR -AHXSR (600x86)-(560x86) = $3600 - $3360 $240 (A)

Required. e) Variable overhead Spending varionee = AHxSR - ANXAR A = 1.4hnx 400=560 SR = $3.40 peohr AR= $3.10 per hr vorable overhead Spending varian = ANNSR-AHXAR (560 x 4 3:40)-(560x83:10) = $1904 - $1736 - $168 (F)