KokoLat Corporation is a manufacturer of premium cocoa beans. KokoLat budgeted 20,000 bottles to be produced per month. The standards below have been established for its variable costs of production. Premium cocoa beans Standard cost per unit ($) Direct material (6 kgs at $4 per kg) Direct labour (1 hour at $7 per hour) Variable production overhead (1 direct labour hour at $3) 24 7 3 34 In July, 18,500 bottles were produced. A total of 113,500 kgs for the costs of $442,650 of direct materials were purchased and used. The direct labour costed $129,940 for a total of 17,800 direct labour hours worked. Actual variable production overhead costs incurred was $58,800. Required: From the previous information, compute the following variances and indicate whether they are favorable (F) or unfavorable (U). State why each of the variances occurred. (a) Material price variance . (b) Material usage variance. (c) Direct labour rate variance.
KokoLat Corporation is a manufacturer of premium cocoa beans. KokoLat budgeted 20,000 bottles to be
produced per month. The standards below have been established for its variable costs of production.
Premium cocoa beans
($)
Direct material
(6 kgs at $4 per kg)
Direct labour
(1 hour at $7 per hour)
Variable production
(1 direct labour hour at $3)
24
7
3
34
In July, 18,500 bottles were produced. A total of 113,500 kgs for the costs of $442,650 of direct materials
were purchased and used. The direct labour costed $129,940 for a total of 17,800 direct labour hours
worked. Actual variable production overhead costs incurred was $58,800.
Required:
From the previous information, compute the following variances and indicate whether they are favorable
(F) or unfavorable (U). State why each of the variances occurred.
(a) Material price variance .
(b) Material usage variance.
(c) Direct labour rate variance.
(d) Direct labour efficiency variance.
(e) Variable overhead spending variance .
(f) Variable overhead efficiency variance .
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