2. Yellow Ltd, a food manufacturer, is reviewing its operation for March 2021. The company produces only one product, called YM. The following standard revenue and cost data per unit of the product is available: Production and sales 90,000 units Selling price £24.00 Direct material (4 kg at £2.50 per kg) £10.00 Direct labour (0.5 hrs at £14.00 per £7.00 hour) Fixed production overheads for March 2021 were expected to be £220,000. Actual data for March 2021 was as follows: 84,000 units of YM were produced and sold at £24.50 each. Production and sales Direct material 378,000 kg were used at a total cost of £869,400. Direct labour 50,400 labour hours were worked at a total cost of £655,200. Fixed production overheads Fixed production overheads were £240,000. There were no inventories at the start or end of March 2021. Required: (a) Calculate the following variances: • Material price and usage variances Labour rate and efficiency variances
2. Yellow Ltd, a food manufacturer, is reviewing its operation for March 2021. The company produces only one product, called YM. The following standard revenue and cost data per unit of the product is available: Production and sales 90,000 units Selling price £24.00 Direct material (4 kg at £2.50 per kg) £10.00 Direct labour (0.5 hrs at £14.00 per £7.00 hour) Fixed production overheads for March 2021 were expected to be £220,000. Actual data for March 2021 was as follows: 84,000 units of YM were produced and sold at £24.50 each. Production and sales Direct material 378,000 kg were used at a total cost of £869,400. Direct labour 50,400 labour hours were worked at a total cost of £655,200. Fixed production overheads Fixed production overheads were £240,000. There were no inventories at the start or end of March 2021. Required: (a) Calculate the following variances: • Material price and usage variances Labour rate and efficiency variances
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:2. Yellow Ltd, a food manufacturer, is reviewing its operation for March
2021. The company produces only one product, called YM.
The following standard revenue and cost data per unit of the product is
available:
Production and sales
90,000 units
Selling price
£24.00
Direct material
(4 kg at £2.50 per kg)
£10.00
Direct labour
(0.5 hrs at £14.00 per £7.00
hour)
Fixed production overheads for March 2021 were expected to be £220,000.
Actual data for March 2021 was as follows:
84,000 units of YM were produced and sold
at £24.50 each.
Production and sales
Direct material
378,000 kg were used at a total cost of
£869,400.
Direct labour
50,400 labour hours were worked at a total
cost of £655,200.
Fixed production
overheads
Fixed production overheads were £240,000.
There were no inventories at the start or end of March 2021.
Required:
(a) Calculate the following variances:
• Material price and usage variances
Labour rate and efficiency variances
Transcribed Image Text:(b) Suggest possible explanations for the variances you have calculated in
part (a). In your answer, ensure to discuss about the possible
relationships between material and labour variances.
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