Reference no: EM132433085
BMAC5203 Accounting for Business Decision Making Assignment - Open University Malaysia, Malaysia
Question - Runaway Corporation is a wholesale manufacturer of tea products. It operates a variable costing system. Given below, is information relating to one of its products, that is bottled premium tea leaves-grade A, which is made in one of the company departments: -
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Bottled premium tea leaves-grade A
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Standard variable product cost Unit ($)
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Direct material (6 kilograms at $4 per kg)
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24
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Direct labor (1 hour at $7 per hour)
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7
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Variable production overhead (1 direct labor hour)
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3
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34
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Additional information -
Variable production overhead varies with direct labor hours of input.
Budgeted fixed production overhead per month is $100,000.
Budgeted production is 20,000 bottles per month.
Actual production and costs for one of the months were as follows:
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Bottles produced
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18,500 bottles ($)
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Direct materials purchased and used, 113,500 kg
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442,650
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Direct labor, 17,800 hours
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129,940
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Variable production overhead incurred
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58,800
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Fixed production overhead incurred
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104,000
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735,390
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Compute the following variances and give reasons for the variances:
a. Material price variance.
b. Material usage variance.
c. Direct labor variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable overhead efficiency variance.
g. Fixed overhead spending variance.
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