Follow Me Bhd is a shampoo manufacturing company using a standard absorption costing system for the shampoo which it produces in its plant. The following information for the last month has been extracted from the company’s records: Standard unit cost per bottle: Direct materials 13 kg at RM6 per kg Direct labour 5 hours at RM20 per hour Variable production overhead 5 hours at RM15 per hour Actual results for last month: The actual quantity of material used in production 62,000 kg Actual material cost incurred RM446,400 Actual output 5150 bottles The actual labour hours worked 25,190 hours The actual labour cost incurred RM516, 395 Actual variable overhead RM365,255 REQUIRED: Calculate the following variances: a.) Material cost variance b) Material price variance c) Material usage variance d) Labour cost variance e. ) Labour rate variance f. ) Labour efficiency variance
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Follow Me Bhd is a shampoo manufacturing company using a standard absorption costing system for the shampoo which it produces in its plant. The following information for the last month has been extracted from the company’s records:
Direct materials 13 kg at RM6 per kg
Direct labour 5 hours at RM20 per hour
Variable production
Actual results for last month:
The actual quantity of material used in production 62,000 kg
Actual material cost incurred RM446,400
Actual output 5150 bottles
The actual labour hours worked 25,190 hours
The actual labour cost incurred RM516, 395
Actual variable overhead RM365,255
REQUIRED:
Calculate the following variances:
a.) Material cost variance
b) Material price variance
c) Material usage variance
d) Labour cost variance
e. ) Labour rate variance
f. ) Labour efficiency variance
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