Tusk pty ltd uses standard costs system for its single product in which variable manufacturing overheads is applied on the basis of direct labour hours. The following information is given:
Standard costs:
Raw material[R16per kg] Per unit R 24.00
Direct labour[0.75hour] p
er unit R6.00
Variable manufacturing overhead cost incurred [0.75hour@ R3.00] per unit
R2.25
Actual information for current year:
Units produced 22400
Purchases of rawmaterial[21000kg - R357000.00
Raw material used 33400 kg
Direct labour[ 8.50 perhour] R142375.00
Variable manufacturing overhead cost incurred R 48575.00
Required:\
1. Direct labour price variance
2. Direct material quantity variance
3. Direct labour variance
4.Direct labour efficiency variance
5. Variable manufacturing overhead expenditure variance
6. variable manufacturing overhead efficiency variance
To calculate the variances mentioned, we need to compare the actual costs with the standard costs. Here's how you can calculate each of the variances:
1. Direct labor price variance:
Direct labor price variance measures the difference between the actual direct labor rate and the standard direct labor rate multiplied by the actual hours worked.
Calculation:
Actual Direct Labor Cost = Actual Direct Labor Rate x Actual Hours
Standard Direct Labor Cost = Standard Direct Labor Rate x Actual Hours
Direct Labor Price Variance = Actual Direct Labor Cost - Standard Direct Labor Cost
Given information:
Actual Direct Labor Rate = R8.50 per hour
Actual Hours = 8.50 hours per unit (given in the standard costs)
Standard Direct Labor Rate = R6.00 per unit (given in the standard costs)
2. Direct material quantity variance:
Direct material quantity variance measures the difference between the actual quantity of material used and the standard quantity of material allowed, multiplied by the standard cost per unit.
Calculation:
Standard Material Cost = Standard Material Quantity x Standard Material Price
Actual Material Cost = Actual Material Quantity x Standard Material Price
Direct Material Quantity Variance = Actual Material Cost - Standard Material Cost
Given information:
Standard Material Quantity = 22,400 units x 1.5 kg (given in the standard costs)
Standard Material Price = R16.00 per kg (given in the standard costs)
Actual Material Quantity = 33,400 kg (given in the actual information)
3. Direct labor variance:
Direct labor variance is the combination of the direct labor price variance and the direct labor efficiency variance. It measures the overall difference between the actual direct labor cost and the standard direct labor cost.
Calculation:
Direct Labor Variance = Direct Labor Price Variance + Direct Labor Efficiency Variance
4. Direct labor efficiency variance:
Direct labor efficiency variance measures the difference between the actual hours worked and the standard hours allowed, multiplied by the standard direct labor rate.
Calculation:
Standard Direct Labor Cost = Standard Direct Labor Rate x Standard Hours
Actual Direct Labor Cost = Actual Direct Labor Rate x Actual Hours
Direct Labor Efficiency Variance = Standard Direct Labor Cost - Actual Direct Labor Cost
Given information:
Standard Hours = 22,400 units x 0.75 hours (given in the standard costs)
Actual Hours = 8.50 hours per unit (given in the actual information)
5. Variable manufacturing overhead expenditure variance:
Variable manufacturing overhead expenditure variance measures the difference between the actual variable manufacturing overhead cost incurred and the budgeted variable manufacturing overhead cost based on standard costs.
Calculation:
Variable Manufacturing Overhead Expenditure Variance = Actual Variable Manufacturing Overhead Cost - Budgeted Variable Manufacturing Overhead Cost
Given information:
Actual Variable Manufacturing Overhead Cost = R48,575.00 (given in the actual information)
Budgeted Variable Manufacturing Overhead Cost = 22,400 units x R2.25 per unit (given in the standard costs)
6. Variable manufacturing overhead efficiency variance:
Variable manufacturing overhead efficiency variance measures the difference between the actual hours worked and the standard hours allowed, multiplied by the variable overhead rate.
Calculation:
Variable Manufacturing Overhead Efficiency Variance = Variable Overhead Rate x (Standard Hours - Actual Hours)
Given information:
Variable Overhead Rate = R3.00 per hour (given in the standard costs)
Standard Hours = 22,400 units x 0.75 hours (given in the standard costs)
Actual Hours = 8.50 hours per unit (given in the actual information)
These calculations will help you determine the various variances mentioned based on the given information and standard costs.