Lancaster Inc produces portable radios. It requires 4 units of Part AC3 in order to manufacture the radio. The standard unit cost of the Part AC3 is set at $3.75. The manager of Lancaster Inc also sets a standard direct labour requirement for the production of the radios at 2 hrs per unit and sets a standard direct labour hourly rate at $11. During the month of May, 18,000 units of Part AC3 was purchased for a total of $63,000 and 2500 units of radios were manufactured using 10,900 units of Part AC3. In order to manufacture the 2,500 units of radios, the direct labours worked for a total of 5,000 hours and the company paid a total of $58,000 to the direct labours. The selling price per unit of Radio was set at $98. The Variable manufacturing overhead is applied using direct labour hours. The variable MOH standard rate was set at $6 per direct labour hours. Actual variable MOH for the month of May was $16,000. Required : a. Calculate both material related variances and comment on your answer. (Show workings clearly) b. Calculate both labour variances and comment on your answer. (Show workings clearly) c. Calculate both variable manufacturing overhead variances and comment on your answer. (Show workings clearly)
Lancaster Inc produces portable radios. It requires 4 units of Part AC3 in order to manufacture
the radio. The
sets a standard direct labour requirement for the production of the radios at 2 hrs per unit and sets a
standard direct labour hourly rate at $11. During the month of May, 18,000 units of Part AC3 was
purchased for a total of $63,000 and 2500 units of radios were manufactured using 10,900 units of
Part AC3. In order to manufacture the 2,500 units of radios, the direct labours worked for a total of
5,000 hours and the company paid a total of $58,000 to the direct labours. The selling price per unit
of Radio was set at $98. The Variable manufacturing
The variable MOH standard rate was set at $6 per direct labour hours. Actual variable MOH for the
month of May was $16,000.
Required :
a. Calculate both material related variances and comment on your answer. (Show workings
clearly)
b. Calculate both labour variances and comment on your answer. (Show workings clearly)
c. Calculate both variable manufacturing overhead variances and comment on your answer.
(Show workings clearly)
Step by step
Solved in 2 steps
