At the end of June 2019, Ash Design has spent RM 320,000 on 80,000 meters of fabric in the production of 20,000 dolls. The production manager is concerned that they are paying more than the company's standard RM 2 per meter fabric and is fully aware of the standard requirement of 8 meters of fabric per doll. The company spent RM 450,000 for 90,000 direct labor hours in the production of 20,000 dolls. The standard labor per doll is 4 hours at an hourly rate of RM 4. A review of Ash Design 6-months the performance revealed that the company had produced 20,000 dolls and incurred RM 90,000 of variable production overheads and worked 90,000 direct labor hours. The standard variable production overhead rate is RM 0.75 per direct hour for each doll and requires 4 standards direct labor hours. Ash Design budgeted and actual fixed overhead incurred for the last six months are RM 180,000 and RM 152,000 respectively. The annual budgeted production volume for Ash Design is 50,000 dolls. Based on the information given, a) CALCULATE the following: i. Direct material variance ii. Direct labor variance iii. Variable overhead variance iv. Fixed overhead variance
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.
At the end of June 2019, Ash Design has spent RM 320,000 on 80,000 meters of fabric in the
production of 20,000 dolls. The production manager is concerned that they are paying more than
the company's standard RM 2 per meter fabric and is fully aware of the standard requirement of 8
meters of fabric per doll.
The company spent RM 450,000 for 90,000 direct labor hours in the production of 20,000 dolls.
The standard labor per doll is 4 hours at an hourly rate of RM 4. A review of Ash Design 6-months
the performance revealed that the company had produced 20,000 dolls and incurred RM 90,000 of
variable production
production overhead rate is RM 0.75 per direct hour for each doll and requires 4 standards direct
labor hours.
Ash Design budgeted and actual fixed overhead incurred for the last six months are RM 180,000
and RM 152,000 respectively. The annual budgeted production volume for Ash Design is 50,000
dolls.
Based on the information given,
a) CALCULATE the following:
i. Direct material variance
ii. Direct labor variance
iii. Variable overhead variance
iv. Fixed overhead variance
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