Martin Company manufactures and sells a chemical compound for industrial use. The following information was available at the beginning of 2017: Standard selling price £1,170.00 Estimated production & sales (units) 2,025 Estimated direct materials (27 Kilograms at £10.00 per Kg.) £270.00 Estimated direct labour (20 hours at £7.00 per hour) £140.00 Estimated variable manufacturing overhead (15 hours at £5.00 per hour) £75.00 At the end of 2017, Martin Company established the following actual figures: Production & sales 1,725 units sold for £1,210.00 per unit Direct materials 63,000 Kg. at £9.00 per Kg. Direct wages 45,000 hours at a total cost of £432,000 Variable manufacturing overhead 31,050 hours at a total cost of £ 230,000 (a) Calculate the following variances and indicate whether the variances are adverse or favourable: (i) Materials price (ii) Materials usage (iii) Labour rate
Martin Company manufactures and sells a chemical compound for industrial use. The following information was available at the beginning of 2017: Standard selling price £1,170.00 Estimated production & sales (units) 2,025 Estimated direct materials (27 Kilograms at £10.00 per Kg.) £270.00 Estimated direct labour (20 hours at £7.00 per hour) £140.00 Estimated variable manufacturing overhead (15 hours at £5.00 per hour) £75.00 At the end of 2017, Martin Company established the following actual figures: Production & sales 1,725 units sold for £1,210.00 per unit Direct materials 63,000 Kg. at £9.00 per Kg. Direct wages 45,000 hours at a total cost of £432,000 Variable manufacturing overhead 31,050 hours at a total cost of £ 230,000 (a) Calculate the following variances and indicate whether the variances are adverse or favourable: (i) Materials price (ii) Materials usage (iii) Labour rate
Martin Company manufactures and sells a chemical compound for industrial use. The following information was available at the beginning of 2017: Standard selling price £1,170.00 Estimated production & sales (units) 2,025 Estimated direct materials (27 Kilograms at £10.00 per Kg.) £270.00 Estimated direct labour (20 hours at £7.00 per hour) £140.00 Estimated variable manufacturing overhead (15 hours at £5.00 per hour) £75.00 At the end of 2017, Martin Company established the following actual figures: Production & sales 1,725 units sold for £1,210.00 per unit Direct materials 63,000 Kg. at £9.00 per Kg. Direct wages 45,000 hours at a total cost of £432,000 Variable manufacturing overhead 31,050 hours at a total cost of £ 230,000 (a) Calculate the following variances and indicate whether the variances are adverse or favourable: (i) Materials price (ii) Materials usage (iii) Labour rate
Martin Company manufactures and sells a chemical compound for industrial use. The following information was available at the beginning of 2017:
Standard selling price £1,170.00 Estimated production & sales (units) 2,025
Estimated direct materials (27 Kilograms at £10.00 per Kg.) £270.00
Estimated direct labour (20 hours at £7.00 per hour) £140.00
Estimated variable manufacturing overhead (15 hours at £5.00 per hour) £75.00
At the end of 2017, Martin Company established the following actual figures:
Production & sales 1,725 units sold for £1,210.00 per unit Direct materials 63,000 Kg. at £9.00 per Kg. Direct wages 45,000 hours at a total cost of £432,000 Variable manufacturing overhead 31,050 hours at a total cost of £ 230,000
(a) Calculate the following variances and indicate whether the variances are adverse or favourable:
(i) Materials price
(ii) Materials usage
(iii) Labour rate
(iv) Labour efficiency
(v) Variable overhead rate
(vi) Variable overhead efficiency
(b) Discuss four possible causes for each of the following variances:
(i) Materials usage
(ii) Labour efficiency
(c) Explain how you would determine which variance to examine further in relation to a work performance?
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
by Bartleby Expert
