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ProTest Company is in the biochem industry and manufactures only a single product, a ...

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Accounting

ProTest Company is in the biochem industry and manufactures only a single product, a
sophisticated testing equipment for chronic illnesses and diseases with the name Test-K. The
following standard costs apply:
For the period, production was budgeted at 15,000 units.
Direct materials 2.5 kilos at $9 per kilo
Direct labour 4.5 hours at $13.50 per hour
Budgeted fixed production overheads $405,000
Fixed production overheads are absorbed on the basis of standard direct labour hours.
The actual data for the period, when production was 15,900 units, are as follows:
Direct materials purchased and used 41,250 kilos costing $8.70 per kilo
Direct labour 69,900 hours at a cost of $13.95 per hour
Fixed production overheads $425,000
Required:
b) Provide specific reasons for the variances on each of the calculations done above for :
i. Direct material price
ii. Direct material usage
iii. Direct labour rate
iv. Direct labour efficiency
You are required to state whether it is a favourable or adverse variance.
c) Discuss several ways in which standard-costing systems should be adapted in todays
manufacturing environment.
Answer b and c more clearly
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