Reference no: EM132634566
MTN Ltd manufactures products for the telecommunication industry with one of the products produced being the plastic casing for an entry level phone handset. MTN Ltd employs a variable standard costing system.
The standard information and associated standard costs for producing a handset are as follows:
Direct material: 450 grams at R1 920 per kg
Direct labour: 1 hour and 30 minutes at R75.00 per hour
Variable manufacturing overhead rate R120.00 per machine hour
Machine hours per handset ¼ machine hour
Annual budgeted fixed manufacturing overheads was forecasted at R90 000 and normal annual production was set at 6 000 handsets. Fixed manufacturing overhead cost and production incurs evenly throughout the year.
During May 2020, MTN Ltd produced 550 handsets. The following are the actual information and costs that were incurred during May:
- Purchased 220 kg of plastic, totalling R418 000. There was 5 kg of plastic left after production in May. There were no opening inventory.
- A total cost of R61 600 was debited relating to the 770 direct labour hours worked.
- 130 machine hours were used at a total cost of R17 1 60.
- Fixed manufacturing overheads amounted to R7 700.
Question 1: What is the standard direct material cost per unit?
a) R1 006.50
b) R1 920.00
c) R864.00
d) R1 900.00
e) R30.00
f) None of the above
Question 2: What is the standard direct material cost for the actual material used?
a) R422 400
b) R412 800
c) R418 000
d) R4 800
e) R1 920
f) None of the above
Question 3: What is the direct material price variance?
a) R4 400 favourable
b) R4 400 unfavourable
c) R9 600 favourable
d) R9 600 unfavourable
e) R4 000 favourable
f) None of the above
Question 4: What is the flexible budget amount for direct material?
a) R412 800
b) R418 000
c) R475 200
d) R422 400
e) R1 056 000
f) None of the above
Question 5: What is the direct material efficiency variance?
a) R4 400 favourable
b) R4 400 unfavourable
c) R9 600 favourable
d) R9 600 unfavourable
e) R62 400 favourable
f) None of the above
Question 6: What is the direct labour price variance?
a) R3 850 unfavourable
b) R3 850 favourable
c) R61 600
d) R4 000 favourable
e) R4 000 unfavourable
f) None of the above