Question : Variance AnalysisThe following standard cost data relate to the operation ofDragon Company...Question...

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Accounting

Question : Variance Analysis
The following standard cost data relate to the operation ofDragon Company for 2016. The standard cost per unit is based on thenormal annual production of 15,000 units.
Standard cost per unit
Direct materials
4kg @ $5.00 per kg
$   20.00
Direct labour
2hrs @ $12.50 per hr
$   25.00
Variable overhead
2hrs @ $3.00 per hr
$   6.00
Fixed overhead
2 labour hrs @ $5.00 per hr
$   10.00
Total
$   61.00
Actual production in 2016 was 10,000 units. The following datawas obtained from Dragon Company’s records:
Direct material purchases
  45,000
Kilograms
Cost of direct materials purchases
$   202,500
Actual direct labour hours
  25,000
Hours
Actual direct labour costs
$   325,000
Actual variable overhead costs
$   100,000
Actual fixed overhead
$   125,000
Required:
3a. Calculate and show flexible budget variance for each costitem.
3b. Calculate the following variances and indicate whether they arefavourable or unfavourable.
v.Variable manufacturing overheadspending variance
vi.Variable manufacturing overheadefficiency variance
vii.Fixed manufacturing overheadspending variance
viii.Fixed manufacturing overheadefficiency variance

Answer & Explanation Solved by verified expert

3.6 Ratings (392 Votes)

Solution 3a Material Variance Standard quantity of material for actual production 100004 40000 Kg Actual quantity of material 45000 Kg Standard price of material 5 per kg Actual price of material 202500 45000 450 Material price variance SP AP AQ 5 450 45000 22500 F Material quantity variance SQ AQ SR See Answer

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In: AccountingQuestion : Variance AnalysisThe following standard cost data relate to the operation ofDragon Company...Question : Variance AnalysisThe following standard cost data relate to the operation ofDragon Company for 2016. The standard cost per unit is based on thenormal annual production of 15,000 units.Standard cost per unitDirect materials4kg @ $5.00 per kg$ 20.00Direct labour2hrs @ $12.50 per hr$ 25.00Variable overhead2hrs @ $3.00 per hr$ 6.00Fixed overhead2 labour hrs @ $5.00 per hr$ 10.00Total$ 61.00Actual production in 2016 was 10,000 units. The following datawas obtained from Dragon Company’s records:Direct material purchases 45,000KilogramsCost of direct materials purchases$ 202,500Actual direct labour hours 25,000HoursActual direct labour costs$ 325,000Actual variable overhead costs$ 100,000Actual fixed overhead$ 125,000Required:3a. Calculate and show flexible budget variance for each costitem.3b. Calculate the following variances and indicate whether they arefavourable or unfavourable.v.Variable manufacturing overheadspending variancevi.Variable manufacturing overheadefficiency variancevii.Fixed manufacturing overheadspending varianceviii.Fixed manufacturing overheadefficiency variance

Standard cost per unit
Direct materials	4kg @ $5.00 per kg	$ 20.00
Direct labour	2hrs @ $12.50 per hr	$ 25.00
Variable overhead	2hrs @ $3.00 per hr	$ 6.00
Fixed overhead	2 labour hrs @ $5.00 per hr	$ 10.00
Total		$ 61.00

Direct material purchases	45,000	Kilograms
Cost of direct materials purchases	$ 202,500
Actual direct labour hours	25,000	Hours
Actual direct labour costs	$ 325,000
Actual variable overhead costs	$ 100,000
Actual fixed overhead	$ 125,000