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Extracts from the budget for Quantum Oak Ltd is shown below:
| | Unit Data |
| Direct Materials: | 8 kg @ $5 per kg |
| Direct Labour: | 4 hours @ $15 per hour |
| Variable overheads | $12 (based on $3 per labour hour) |
| Budgeted production: | 20,000 units |
| Budgeted Fixed overheads: | $400,000 (applied based on labour hours) |
Quantum Oaks actual results were:
| Actual production: | 18,000 units. |
| Materials purchased and used: | $810,000 (135,000 kg) |
| Labour costs: | $1,185,750 (76,500 hours) |
| Actual factory overheads: | $390,000. |
Required:
(a) Calculate the direct material price and usage variances and indicate if they are favourable or unfavourable.
(6 marks)
(b) Calculate the direct labour rate and efficiency variances and indicate if they are favourable or unfavourable.
(6 marks)
(c) Calculate the fixed overhead volume variance and indicate if it is favourable or unfavourable.
(3 marks)
(d) Identify ONE possible interpretation for the direct material variances calculated in (a).
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