Reference no: EM132681958

Question - Standard material per unit: 2 tonnes of magnesium ore (rock) - Standard material cost: $2,000 per tonne.

Standard labour hours per unit: 10.0 hours - Standard labour rate: $55.00 per hour.

During the past year the manufacturer produced 6,000 tonnes of their product.

The ACTUAL COSTS and QUANTITIES used are shown below:

Material PURCHASED: 15,000 tonnes at a total cost of $32,550,000. During the period 12,180 tonnes of material was used in production.

Direct Labour costs for the period were $3,349,170 and 61,200 hours were worked.

Required -

a) Use the standard cost variance formulas to compute the four PRIME COST STANDARD COST VARIANCES. Show all formulas, your workings and indicate whether each variance is favourable or unfavourable.

b) Offer comments to advise management on the labour variances, and on which, if any, of the variances should be investigated by management or whether any of the standard costs should be reviewed given the variance results you have calculated.