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Question 1

Kearsley Ltd manufactures a single product, a laminated product used in kitchen surfaces. The standard cost is 118 and is made up as follows:

Direct materials 8 sq. metres at 5 per square metre 40.00

Direct labour 6 hours at 5 per hour 30.00

Variable overheads 6 hours at 3 per hour 18.00

Fixed overheads 6 hours at 5 per hour 30.00

118.00

The standard selling price of the product is 150. The monthly budget projects production and sales of 650 units. The company operates an absorption costing system and recovers overhead through a direct labour basis.

Actual figures for the month of September 2020 are as follows:

Sales 600 units at 155 per unit

Production 700 units

Direct Labour 4,100 hours costing 18,655

Direct materials 6,000 square metres costing 28,500

Variable overheads 12,000

Fixed Overheads 23,575

You are required to calculate and suggest possible reasons for the following variances:

1. Materials price and usage
2. Labour rate and efficiency
3. Variable overhead efficiency and expenditure
4. Fixed overhead expenditure, volume efficiency and volume capacity

Question 2

It is claimed that the origins of standard costing are said to date back to the early twentieth century, possibly even the late nineteenth century. Standard costing have been descried as outdated and incompatible with modern manufacturing techniques. Discuss whether standard costing is still relevant in the modern wor

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