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Practice questions (1)        The standard costs of wooden ducks on wheels, for the CURRENT year, for 5 mm...

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Accounting

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(1)        The standard costs ofwooden ducks on wheels, for the CURRENT year, for5 mm board and for cutting are as follows:-

           5 mm board: 0.2 sq. metre at £4.50 per sq. metre.

           Cutters: 1.5 minutes at £7.20 per hour.

In the most recent period, 120 woodenducks on wheels were produced.

25 sq. metres of 5 mm board wererequisitioned from stores at a total cost of £110.

           2.75 hours were recorded for cutters at a total cost of £22.

           Required

(a)        Calculate thematerial price variance and material usage variance for 5 mmboard

(ii)        Calculate the wagerate variance and labour efficiency variance for cutters

           

Suggest possible reasons for thevariances calculated.

(2)        Given standardcost per unit:

           Direct materials (4 kg. @ 75p per kg)

           Direct labour (2 hrs @ £1.60 per hr)

           Actual details are:

           

£

Output produced (units)

         38,000

           

Direct material purchased

        180,000 kg

           126,000

          issued to production

        154,000 kg

Direct labour

          78,000hrs

           136,500

           Calculate:         Materialand labour variances.

Answer & Explanation Solved by verified expert
4.0 Ratings (562 Votes)

(1)

a

AQ = Actual quantity
SQ = Standard quantity
AR = Actual rate
SR = Standard rate
Actual cost
AQ x AR AQ x SR SQ x SR
25 x 4.40 25 x 4.5 24 x 4.5
(1) =           110.00 (2) =     112.50 (3) =             108.00
Direct material price variance (2) - (1) = 2.50 Favourable
Direct material quantity/efficiency variance (3) - (2) = -4.50 Unfavourable
Total direct material variance (3) - (1) = -2.00 Unfavourable

ii

AH = Actual hours
SH = Standard hours
AR = Actual rate
SR = Standard rate
Actual cost
AH x AR AH x SR SH x SR
         2.75 x                8.00          2.75 x          7.20                3.00 x                 7.20
(1) =             22.00 (2) =        19.80 (3) =               21.60
Direct labor rate variance (2) - (1) =              (2.20) Unfavourable
Direct labor efficiency variance (3) - (2) =                1.80 Favourable
Total direct labor variance (3) - (1) =              (0.40) Unfavourable

(2)

Material variances:

AQ = Actual quantity
SQ = Standard quantity
AR = Actual rate
SR = Standard rate
Actual cost
AQ x AR AQ x SR SQ x SR
154,000 x 0.70 154,000 x 0.75 152,000 x 0.75
(1) = 107,800.00 (2) = 115,500.00 (3) =     114,000.00
Direct material price variance (2) - (1) = 7,700.00 Favourable
Direct material quantity/efficiency variance (3) - (2) = -1,500.00 Unfavourable
Total direct material variance (3) - (1) = 6,200.00 Favourable

Labor variances:

AH = Actual hours
SH = Standard hours
AR = Actual rate
SR = Standard rate
Actual cost
AH x AR AH x SR SH x SR
78,000.00 x                1.75 78,000.00 x               1.60      76,000.00 x                 1.60
(1) = 136,500.00 (2) = 124,800.00 (3) =     121,600.00
Direct labor rate variance (2) - (1) =    (11,700.00) Unfavourable
Direct labor efficiency variance (3) - (2) =      (3,200.00) Unfavourable
Total direct labor variance (3) - (1) =    (14,900.00) Unfavourable

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