Question 9

Standard Cost for Product FGT           

  £
Materials (10kg x £8 per kg) 80
Labour (5hrs x £6 per hr) ¬ 30
Variable O/Hds (5hrs x £8 per hr) 40
Fixed O/Hds (5hrs x £9 per hr) 45
  195
Budgeted Results          
Production 10000 units
Sales 7500 units
Selling Price £300 per unit
Actual Results          
Production 13000 units
Sales 6000 units
Materials 85000 kg Cost £700000
Labour 36000 hrs Cost £330900
Variable O/Hds £400000
Fixed O/Hds £500000
Selling Price £260 per unit

Calculate

a. Material total variance

Should have sold 13000 × 80 1040000

But did sold 700000

Direct total material variance (340000)

b. Material price variance

85000kg should have cost ×8 680000

Did cost 700000

Material price variance (20000)

c. Material usage variance

What should have been used13000×10 130000

Buts did use 85000

 Variance in kgs 45000

Valued at standard cost per kg ×8

Direct material usage variance 360000

d. Labour total variance

Hours should have used × 30 390000

But did use 330900

Labour rate variance (59100)

e. Labour rate variance

Hours should have used 36000× 6 216000

But did use 330900

Labour rate variance (114900)

f. Labour efficiency variance.

13000 units should have used ×5 65000

But it did take 36000

Variance in hours 29000

Valued at standard rate per hour ×6

Direct labour efficiency variance (174000)

g. Variable overhead total variance and all sub- variances

13000 units should have cost ×40 520000

But did cost 400000

Variable production overhead variance (120000)

h. Fixed Production overhead total Variance and all sub-variances

Overhead incurred 500000

Overhead absorbed (13000×45) 585000

Overhead variance (85000)

i. Selling price variance

Revenue from 6000 units should have been ×300 1800000

But was 260 1560000

Selling price variance (240000)

j. Sales volume variance

Budgeted sales volume 130000

Actual sales volume 6000

Variance in units 7000

Standard margin per unit (300-195) 105

Sales volume variance (735000)