Liverpool Manufacturing Limited developed the following standard costs for direct material and direct labour for one of their major products, the 45 litres heavy-duty plastic container. Each container requires the following: Types of Cost Standard quantity Standard price Direct materials 0.2 kilos £30 per kilo Direct labor 0.1 hours £17 per hour During June, Liverpool Manufacturing Limited produced and sold 10,000 containers using 2,100 kilos of direct materials at an average cost per kilo of £25 and 1,100 direct labor hours at an average wage of £16 per hour. Required: a) Calculate the following variances for June: į Direct material price variance ii. Direct material quantity variance iv. Direct labour rate variance v. Direct labour efficiency variance b) Briefly comment on the material and labor variances calculated in a) c) Evaluate the importance of standard costing in budgeting process within firms
Liverpool Manufacturing Limited developed the following standard costs for direct material and direct labour for one of their major products, the 45 litres heavy-duty plastic container. Each container requires the following: Types of Cost Standard quantity Standard price Direct materials 0.2 kilos £30 per kilo Direct labor 0.1 hours £17 per hour During June, Liverpool Manufacturing Limited produced and sold 10,000 containers using 2,100 kilos of direct materials at an average cost per kilo of £25 and 1,100 direct labor hours at an average wage of £16 per hour. Required: a) Calculate the following variances for June: į Direct material price variance ii. Direct material quantity variance iv. Direct labour rate variance v. Direct labour efficiency variance b) Briefly comment on the material and labor variances calculated in a) c) Evaluate the importance of standard costing in budgeting process within firms
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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I would like to get answers for a), b) and c)
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Transcribed Image Text:Liverpool Manufacturing Limited developed the following standard costs for direct material and direct labour
for one of their major products, the 45 litres heavy-duty plastic container. Each container requires the
following:
Types of Cost
Standard quantity
Standard price
Direct materials
0.2 kilos
£30 per kilo
Direct labor
0.1 hours
£17 per hour
During June, Liverpool Manufacturing Limited produced and sold 10,000 containers using 2,100 kilos of
direct materials at an average cost per kilo of £25 and 1,100 direct labor hours at an average wage of £16
per hour.
Required:
a) Calculate the following variances for June:
į Direct material price variance
ii. Direct material quantity variance
iv. Direct labour rate variance
v. Direct labour efficiency variance
b) Briefly comment on the material and labor variances calculated in a)
c) Evaluate the importance of standard costing in budgeting process within firms
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