Musang Coffee Factory process and produce premium quality of coffee. It operates a standard absorption costing system for its single product. Budgeted data relating to the product for the period ended was as follows: Standard production cost RM per unit Coffee (3 kilos x RM 38.40 per kilo) 115.20 Direct labour (2.5 hours x RM 19.10 per hour) 47.75 Fixed overheads (2.5 hours x RM 21.50 per hour) 53.75 Production and sales: 2,500 units Standard selling price
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.
A. Musang Coffee Factory process and produce premium quality of coffee. It operates a standard absorption costing system for its single product. Budgeted data relating to the product for the period ended was as follows:
Standard production cost RM per unit
Coffee (3 kilos x RM 38.40 per kilo) 115.20
Direct labour (2.5 hours x RM 19.10 per hour) 47.75
Fixed
Production and sales: 2,500 units
Standard selling price RM 280 per unit
Actual results for the next period were as follows:
Production: 3,050 units
Sales: 2,880 units sold for RM 781,200
Coffee (purchased and used): 9,630 kilos costing RM 360,162
Direct labour: 7,120 hours costing RM 149,520
Fixed overheads: RM 138,650
Required:
Calculate the following variances for the period:
- Selling price
- Sales volume profit
- Direct material price
- Direct material usage
- Direct labour rate
- Direct labour efficiency
- Fixed overheads expenditure
- Fixed overheads volume
B. Explain any TWO advantages and TWO disadvantages of
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