Ch12-week 11 tutorial questions and solutions.docx - 12.27 Materials and manufacturing labour variances Consider the following data collected for

Ch12-week 11 tutorial questions and solutions.docx - 12.27...

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12.27 Materials and manufacturing labour variances Consider the following data collected for Tents‘n’Stuff Pty Ltd: Direct Direct manufacturing materials labour Cost incurred: actual inputs × actual prices $200 000 $90 000 Actual inputs × standard prices 214 000 86 000 Standard inputs allowed for actual output × standard prices 225 000 80 000 Required Calculate the price and efficiency variances for direct materials and direct manufacturing labour. Solution: Material price variance=(actual price-standard price)*Actual quantity purchased = actual price*actual quantity purchased-standard price*actual quantity purchased = 200,000-214,000=14,000 F Material efficiency variance= (actual quantity used-standard quantity allowed per unit*actual output)*standard price =214,000-225,000=11,000 F Labour price variance=(actual rate –standard rate)*actual hours =actual rate*actual hours-standard rate*actual hours =90,000-86,000=4,000 U Labour efficiency variance=(actual hours-standard hours allowed per unit*actual output)*standard rate =86,000-80,000=6,000 U 12.28 Direct materials and direct manufacturing labour Maroochy Pty Ltd designs and manufactures wetsuits. It sells its wetsuits to brand-name retailers. Maroochy’s May 2018 static budget and actual results for direct inputs are: Static budget (standards) Number of wetsuits 950 Per wetsuit Direct materials 2.25 metres at $17.50 per metre = $39.375 Direct manufacturing labour 1.25 hours at $ 23.50 per hour = $29.375 Actual results Number of wetsuits produced 1 050 Total direct inputs Direct materials 2 520 metres at $16.75 per metre = $42 210 Direct manufacturing labour 1 050 hours at $24.00 per hour = $25 200 The production manager discusses the sources of the variances: ‘A new type of material was purchased in May 2018. This led to faster cutting and sewing, but the workers used more
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material than usual as they learned to work with it. For now, the standards are fine.’
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