Reference no: EM132593761

The Uniform Company (U Co) manufactures school uniforms. One of its largest contracts is with the Girls' Private School Trust (GPST), which has 35 schools across the country, all with the same school uniform.

• After a recent review of the uniform at the GPST schools, the school's spring/summer dress has been re-designed to incorporate a dropped waistband. Each new dress now requires 2.2 metres of material, which is 10% more material than the previous style of dress required. However, a new material has also been chosen by the GPST which costs only $ 2.85 per metre which is 5% cheaper than the material used on the previous dresses.
• In February, the total amount of material used and purchased at this price was 54,560 metres. The design of the new dresses has meant that a complicated new sewing technique needed to be used. Consequently, all staff required training before they could begin production. The manager of the sewing department expected each of the new dresses to take 10 minutes to make as compared to 8 minutes per dress for the old style.
• SU Co has 24 staff, each of whom works 160 hours per month and is paid a wage of $12 per hour. All staff worked all of their contracted hours in February on production of the GPST dresses and there was no idle time. No labour rate variance arose in February.

Activity levels for February were as follows:

Budgeted production and sales (units) 30,000

Actual production and sales (units) 24,000

The production manager at SU Co is responsible for all purchasing and production issues which occur. SU Co uses standard costing and usually, every time a design change takes place, the standard cost card is updated prior to production commencing. However, the company accountant responsible for updating the standards has been off sick for the last two months. Consequently, the standard cost card for the new dress has not yet been updated.

Required:

Question a) Discuss the relevance of standard costing in today's manufacturing environment

Question b) Determine the following material variances

i. Material price planning variance

ii. Material price operational variance

iii. Total material price variance

iv. Material usage planning variance

v. Material usage operational variance

vi. Total material usage variance

Question c) Determine the following labour variances

i. Labour efficiency planning variance

ii. Labour efficiency operational variance

iii. Total labour efficiency variance

Question d) Assess the performance of the production manager for the month of February in term of

i. Material Variance

ii. Labour Efficiency Variance