QUESTION 1 MacDowell Company manufactures 100 kg bags of fertilizer that have the following unit standard costs for direct materials and direct labour:Direct materials (100 kg @ $1.00 per kilogram)$100.00Direct labour (0.5 hours at $24 per hour) 12.00Total standard direct cost per 100 kg bag$112.00The following activities were recorded for October:•1,000 bags were manufactured.•102,500 kg of materials costing $101,000 were purchased and used•$12,000 was paid for 475 hours of direct labour.Required:A.Compute the direct materials variances. B.Compute the direct labour variances. C.Give possible reasons for the occurrence of each of the preceding variances.

C. 1. Purchase of material at a higher cost than the budgeted cost. 2. Actual labor cost incurred is…

Answered: MacDowell Company manufactures 100 kg…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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QUESTION 1

MacDowell Company manufactures 100 kg bags of fertilizer that have the following unit standard costs for direct materials and direct labour:

Direct materials (100 kg @ $1.00 per kilogram)	$100.00
Direct labour (0.5 hours at $24 per hour)	12.00
Total standard direct cost per 100 kg bag	$112.00

The following activities were recorded for October:

•	1,000 bags were manufactured.
•	102,500 kg of materials costing $101,000 were purchased and used
•	$12,000 was paid for 475 hours of direct labour.

Required:

A.	Compute the direct materials variances.
B.	Compute the direct labour variances.
C.	Give possible reasons for the occurrence of each of the preceding variances.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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