Reference no: EM132560557

ABC Ltd produced 7,800 gadgets (one of its many products) during July.

The accounting records indicated the following:

Direct material purchased25,000 kilograms @ $2.60 per kilogram

Direct material used23,100 kilograms

Direct labour used40,100 hours @ $18 per hour

The widget has the following standard prime costs:

Direct material: 3 kilograms @ $2.50 per kilogram $7.50

Direct labour hours: 5 hours @ $17 per hour$85.00

Standard prime cost per unit$92.50

In relation to fixed and variable overheads Benita Ltd has the following standards and flexible budget data for all its products:

Standards and Flexible Budget Data:

Standard variable overhead rate $18 per direct labour hour

Standard quantity of direct labour2 hours per unit of output

Budgeted fixed overhead$300,000

Budgeted output 25,000 units

Actual results for July are as follows:

Actual output 20,000 units

Actual variable overhead$960,000

Actual fixed overhead$291,000

Actual direct labour50,000 hours

Required:

Question 1: For the month of July, calculate the following variances, indicating whether each is favourable or unfavourable:

A) Direct material and labour variances identifying (calculating) the direct material price and quantity variances and the direct labour rate and efficiency variances separately

B) Variable overhead variances identifying (calculating) the spending variance and efficiency variances separately

C) Fixed overhead budget variance and the fixed overhead volume variance