CLEAR WATER

Actual Variance Flexible budget Volume Variance Static budget

Units 72,000 72,000 8,000 64,000 Volume variance because actual output exceeded static budget is 8,000 units

Sales revenue 1,152,000 - 36,000 1,188,000 132,000 1,056,000

Variable costs
DM 216,000 14,400 201,600 22,400 179,200
DL 360,000 - 72,000 432,000 48,000 384,000
VMO 57,600 - 18,000 75,600 8,400 67,200
Other costs 242,000 - 57,520 299,520 33,520 266,000 per unit 4.16
- -
Total Vc 875,600 - 133,120 1,008,720 112,320 896,400
CM 276,400 97,120 179,280 19,680 159,600
- -
Fixed Manufacturing C 75,000 3,000 72,000 - 72,000

Operating income 201,400 94,120 107,280 19,680 87,600

Direct material variance

DM price variance (Actual quantity of Kg used @ budgeted standard price)-(Actual quantity of Kg used @ Actual price)

AQ (SP-AP)
Var =(1.40-1.00)*(72,000units*3kg/unit)
86,400 Favorable Actual price was lower than budgeted std price

Direct Material efficiency variance

(Direct Material standard allowed for actual output - Direct Material s used for actual output) Standard price

SP(SQ-AQ)
Var ={(72,000 units * 2kg/unit)-(72,000*3kg/unit)} *1.40
- 100,800 Unfavorable used more materials for actual output than was allowed by standard

B)
Calculate the following 4 variances

Direct Labour Rate (price) variance

Direct Labour Efficiency variance

Variable manufacturing Overhead rate variance

Variable manufacturing Overhead efficiency variance

Fixed Manufacturing overhead variance= Actual - Static budget= 75000-72000=3000