Question Tag: Material Variance

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  • 6 Marks

ICMA – Nov 2024 – L1 – Q3c – Material and Labour Variances

Calculates material and labour variances based on given actual and standard cost data.

Material and Labour Variances
The data below relates to Agbamame Enterprise for its flagship product, “Herb of Life”:

Standard Cost Card – Per Unit of Herb of Life

Description Cost (GH¢)
Direct materials 5 kg at GH¢4 per kg = GH¢20
Direct labour 4 hours at GH¢15 per DLH = GH¢60
Variable overhead 4 hours at GH¢20 per DLH = GH¢80
Fixed overhead GH¢50 per unit

Budgeted production: 600 units
Actual sales and production: 550 units

Actual cost of:

Actual Costs Cost (GH¢)
Labour (1650 hours) 16,500
Materials (1650 kg) 5,775
Fixed overhead 15,000
Variable overhead 13,275

Data shows that 5% of labour hours paid for was idle, and 10% of materials bought was in stock at the end of the period.

Required:
i) Calculate the material variances.
ii) Calculate the labour variances.

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  • 20 Marks

PM – Nov 2014 – L2 – Q2 – Standard Costing and Variance Analysis

Calculate various cost and sales variances, including an operating statement for Ibek Limited.

Ibek Limited manufactures a standard product and operates a system of variance accounting using a fixed budget.

As a newly appointed Management Accountant, you are responsible for preparing the monthly operating statements.

Extracts from the budget for the standard product cost and actual data for the month ended 31 December 2013 are given below:

Budgeted and Standard Cost Data:

  • Budgeted sales and production for the month: 20,000 units
  • Standard cost for each unit of product:
Item Details
Direct materials: A: 10 kg at N2 per kg
B: 5 kg at N10 per kg
Direct wages 5 hours at N6 per hour
Fixed overhead Absorbed at 200% of direct wages
  • Budgeted sales price has been calculated to give a margin of 20% of sales price.

Actual Data for the Month Ended 31 December 2013:

  • Production: 19,000 units sold at a price of 15% higher than that budgeted
  • Direct materials consumed:
Item Quantity Cost per kg
Material A 192,000 kg N2.40
Material B 96,000 kg N9.40
  • Direct wages incurred: 92,000 hours at N6.40 per hour
  • Fixed production overhead incurred: N580,000

Required:

(a) Prepare the operating statement for the month ended 31 December 2013. (3 Marks)

(b) Calculate the following variances: i. Direct material cost variance (5 Marks)
ii. Direct labour variances (5 Marks)
iii. Overhead variances (3 Marks)
iv. Sales variances (4 Marks)

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  • 12 Marks

MI – Nov 2020 – L1 – SB – Q4b – Basic Variance Analysis

Calculate material and labour variances for product AB, and list possible causes of each variance.

b. ABC maintains the following standard cost card for product AB:

Item Standard Quantity Standard Price Total Cost (N)
Direct Material A 3kg @ N8 per kg N24
Direct Material B 5kg @ N6 per kg N30
Direct Labour 2hrs @ N24 per hr N48
Variable Overhead 2hrs @ N9 per hr N18
Total Standard Cost N120

Actual Results for the Period:

  • Actual production: 11,800 units
  • Direct material A: 35,800kg @ N7.5 per kg = N268,500
  • Direct material B: 62,000kg @ N7 per kg = N434,000
  • Direct labour: 24,500 hours @ N25 per hour = N612,500
  • Variable overhead: 24,500 hours @ N9 per hour = N220,500

Required:
i. Calculate the following variances:

  • Material price
  • Material usage
  • Total material
  • Labour rate
    (9 Marks)

ii. List TWO possible causes of each of the variances in (i) above. (3 Marks)

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  • 1 Marks

MI – Nov 2021 – L1 – SA – Q9 – Basic Variance Analysis

Calculate the total material variance for product TU.

STUV is into production of a single product TU. Standard material cost per unit is 2kg @₦500 per kg. Actual production during the period is 5,000 units. Using 1.95kg purchased at the rate of ₦510 per kg. What is the total material variance?

A. ₦125,000 (F)
B. ₦97,500 (A)
C. ₦97,500 (F)
D. ₦27,500 (F)
E. ₦27,500 (A)

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  • 10 Marks

MA – Dec 2023 – L2 – Q3a – Standard costing and variance analysis

This question involves calculating various cost and sales variances for Odumasi Ltd under a standard marginal costing system.

Odumasi Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product, which the company manufactures – ‘Tekie’. The system became operational on 1 March 2021.

The Management Accountant has consulted with the Senior Engineer and they have agreed on the following standard specifications to manufacture one unit of the product ‘Tekie’:

  • Direct materials: 4 kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour

According to the Marketing Director, Odumasi Ltd operates in an industry where the budgeted selling price is normally calculated to achieve a markup of 30% on cost. The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

The actual results for the month of March 2021 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000.
  • Production: 23,000 units.
  • Direct Materials: 90,000 kg @ GH¢162,000.
  • Direct labour: 48,000 hours @ GH¢576,000.
  • Variable overhead: GH¢350,000.

Required:
Calculate the relevant variances for March 2021 under the headings of sales, materials, labour, and overheads.

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  • 12 Marks

MA – May 2018 – L2 – Q5a – Standard Cost Variances Analysis

Calculate standard cost variances including sales price, material price, and labour efficiency.

The following information relates to product Jupiter, produced by Bfield Ltd during January. This represents the information that remains after a fire in the premises destroyed most of the accounting records.

Variances GH¢
Selling price 50,000 A
Materials price 28,500 F
Materials usage 7,500 A
Labour rate 18,700 F
Labour efficiency 20,400 A

Actual data

  • Sales (25,000 units at GH¢10) = GH¢250,000
  • Materials costs (112,500 kg at GH¢1.20) = GH¢135,000
  • Labour costs (75,000 hrs. at GH¢1.9) = GH¢142,500

There was no opening or closing inventories.

Required:
Calculate the following:
i) Standard selling price per unit; (3 marks)
ii) Standard cost of material per kilogram; (3 marks)
iii) Standard kilograms of materials required per unit; (2 marks)
iv) Standard labour rate per hour; (2 marks)
v) Standard hours of labour required per unit. (2 marks)

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  • 10 Marks

MA – April 2022 – L2 – Q3a – Standard costing and variance analysis

Prepare a standard cost card and calculate variances for Plytimba's recent financial period.

Plytimba manufactures high-quality wooden chairs using odum sourced from sustainable forests. The company began trading two years ago having identified a niche market for the product.

During the year, Plytimba was forced to purchase wood from a different company as the usual supplier did not have sufficient stock available. The company operates a standard variable costing system and details relating to the most recent financial period are shown below.

Budgeted Information:

  • Production in units: 134,400
  • Direct materials: 10,080 square metres odum wood = GH¢282,240
  • Direct labour: 33,600 hours = GH¢483,840
  • Variable production overhead (based on direct labour hours): GH¢225,792
  • Fixed production overhead: GH¢29,200

Actual Information:

  • Production in units: 135,000
  • Direct materials: 10,800 square metres odum wood = GH¢300,240
  • Direct labour hours: 27,000 hours = GH¢486,000
  • Variable production overhead: GH¢194,400
  • Fixed production overhead: GH¢30,150

Required:

i) Prepare a Standard Cost Card for one wooden chair. (4 marks)

ii) Calculate SIX (6) variances in as much detail as the information above permits. (6 marks)

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  • 9 Marks

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

You have been asked as a cost accountant to reconcile the Budgeted profit to the actual profit using the variance report generated by the management accountant.

i. Calculate the sales variances (2 marks)
ii. The total material variance (1 mark)
iii. The total wage variances (1 mark)
iv. Total manufacturing overhead variances (1 mark)
v. Reconciliation of Budget profit to the actual profit (4 marks)

(Total = 9 marks)

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  • 15 Marks

MA – Nov 2016 – L2 – Q4a – Standard costing and variance analysis

Calculate various sales, material, labour, and overhead variances for Jungle Twist Ltd based on the provided data.

Jungle Twist Ltd manufactures quality blocks for the housing industry in Ghana. It operates a standard marginal costing system. The following standard costs, volume, and revenue data for the quarter ending 31 October 2015 are provided:

Standard cost card:

  • Selling price: GH¢18 per block
  • Costs:
    • Direct material P: 3 kg at GH¢2.60 per kg
    • Direct material Q: 2 kg at GH¢2.50 per kg
    • Direct labour: 2 hours at GH¢0.60 per hour
    • Variable overheads: GH¢0.50 per direct labour hour
  • Budgeted sales for the quarter: 62,500 blocks
  • Variable overheads are absorbed at the rate of GH¢0.50 per direct labour hour.
  • Fixed production overhead for the quarter is estimated to be GH¢78,500.

The following actual results were recorded for the quarter just ended 31 October 2015:

  • Production: 60,000 blocks
  • Sales: 58,000 blocks
  • Selling price: GH¢17.00 per block
  • Direct material P: 150,000 kg were bought and used at GH¢360,000
  • Direct material Q: 109,000 kg were bought and used at GH¢327,000
  • Direct labour: 108,000 hours were worked for at a cost of GH¢90,400
  • Variable overheads: GH¢82,000
  • Fixed production overheads: GH¢80,000

Required:
Calculate the following variances for the quarter just ended 30 September 2015:

i) Sales volume and sales price variances; (3 marks)

ii) Price and usage variances for each material; (3 marks)

iii) Mix and yield variance for each material; (3 marks)

iv) Labour rate, labour efficiency, and idle time variances; (3 marks)

v) Variable overheads expenditure and variable overheads efficiency variances. (3 marks)

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  • 20 Marks

IMAC – DEC 2022 – L1 – Q3 – Scope of Management Accounting | Standard Costing and Variance Analysis

Explanation of responsibility accounting classifications, reasons for full costing, and calculation of material, labour, and overhead variances.

a) Responsibility Accounting is a system of accounting in which costs are identified with persons who are primarily responsible for making decisions about the costs in question. Responsibility Accounting classifies cost under two main headings.

Required:
Explain the TWO (2) classifications of cost under Responsibility Accounting. (2 marks)

b) Full costing is an accounting method used to determine the complete end-to-end cost of producing products or services. Accountants use the term full cost to mean more than a product’s manufacturing or production costs (including fixed manufacturing overhead).

Required:
Explain FOUR (4) reasons full cost of a product or service may be calculated. (8 marks)

c) Afram Ltd has just introduced a standard marginal costing system to assist in the planning and control of the production activities for its single product, Amino. The system became operational on 1 January 2022. The Functional Director responsible for cost and management accounting had a discussion with the Production Manager, and both have agreed on the following standard cost information to manufacture one unit of product, Amino.

Budgeted cost:

  • Direct materials: 4kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour.

Actual Results:
The actual results for January 2022 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000
  • Production: 23,000 units
  • Direct Materials: 90,000 kgs at a cost of GH¢162,000
  • Direct labour: 48,000 hours at a cost of GH¢576,000
  • Variable overhead: GH¢350,000

The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

Required:
Calculate the following variances:
i) Direct Material Price
ii) Direct Material Usage
iii) Direct Labour Rate
iv) Direct Labour Efficiency
v) Variable Overhead Efficiency (10 marks)

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  • 6 Marks

ICMA – Nov 2024 – L1 – Q3c – Material and Labour Variances

Calculates material and labour variances based on given actual and standard cost data.

Material and Labour Variances
The data below relates to Agbamame Enterprise for its flagship product, “Herb of Life”:

Standard Cost Card – Per Unit of Herb of Life

Description Cost (GH¢)
Direct materials 5 kg at GH¢4 per kg = GH¢20
Direct labour 4 hours at GH¢15 per DLH = GH¢60
Variable overhead 4 hours at GH¢20 per DLH = GH¢80
Fixed overhead GH¢50 per unit

Budgeted production: 600 units
Actual sales and production: 550 units

Actual cost of:

Actual Costs Cost (GH¢)
Labour (1650 hours) 16,500
Materials (1650 kg) 5,775
Fixed overhead 15,000
Variable overhead 13,275

Data shows that 5% of labour hours paid for was idle, and 10% of materials bought was in stock at the end of the period.

Required:
i) Calculate the material variances.
ii) Calculate the labour variances.

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  • 20 Marks

PM – Nov 2014 – L2 – Q2 – Standard Costing and Variance Analysis

Calculate various cost and sales variances, including an operating statement for Ibek Limited.

Ibek Limited manufactures a standard product and operates a system of variance accounting using a fixed budget.

As a newly appointed Management Accountant, you are responsible for preparing the monthly operating statements.

Extracts from the budget for the standard product cost and actual data for the month ended 31 December 2013 are given below:

Budgeted and Standard Cost Data:

  • Budgeted sales and production for the month: 20,000 units
  • Standard cost for each unit of product:
Item Details
Direct materials: A: 10 kg at N2 per kg
B: 5 kg at N10 per kg
Direct wages 5 hours at N6 per hour
Fixed overhead Absorbed at 200% of direct wages
  • Budgeted sales price has been calculated to give a margin of 20% of sales price.

Actual Data for the Month Ended 31 December 2013:

  • Production: 19,000 units sold at a price of 15% higher than that budgeted
  • Direct materials consumed:
Item Quantity Cost per kg
Material A 192,000 kg N2.40
Material B 96,000 kg N9.40
  • Direct wages incurred: 92,000 hours at N6.40 per hour
  • Fixed production overhead incurred: N580,000

Required:

(a) Prepare the operating statement for the month ended 31 December 2013. (3 Marks)

(b) Calculate the following variances: i. Direct material cost variance (5 Marks)
ii. Direct labour variances (5 Marks)
iii. Overhead variances (3 Marks)
iv. Sales variances (4 Marks)

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  • 12 Marks

MI – Nov 2020 – L1 – SB – Q4b – Basic Variance Analysis

Calculate material and labour variances for product AB, and list possible causes of each variance.

b. ABC maintains the following standard cost card for product AB:

Item Standard Quantity Standard Price Total Cost (N)
Direct Material A 3kg @ N8 per kg N24
Direct Material B 5kg @ N6 per kg N30
Direct Labour 2hrs @ N24 per hr N48
Variable Overhead 2hrs @ N9 per hr N18
Total Standard Cost N120

Actual Results for the Period:

  • Actual production: 11,800 units
  • Direct material A: 35,800kg @ N7.5 per kg = N268,500
  • Direct material B: 62,000kg @ N7 per kg = N434,000
  • Direct labour: 24,500 hours @ N25 per hour = N612,500
  • Variable overhead: 24,500 hours @ N9 per hour = N220,500

Required:
i. Calculate the following variances:

  • Material price
  • Material usage
  • Total material
  • Labour rate
    (9 Marks)

ii. List TWO possible causes of each of the variances in (i) above. (3 Marks)

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  • 1 Marks

MI – Nov 2021 – L1 – SA – Q9 – Basic Variance Analysis

Calculate the total material variance for product TU.

STUV is into production of a single product TU. Standard material cost per unit is 2kg @₦500 per kg. Actual production during the period is 5,000 units. Using 1.95kg purchased at the rate of ₦510 per kg. What is the total material variance?

A. ₦125,000 (F)
B. ₦97,500 (A)
C. ₦97,500 (F)
D. ₦27,500 (F)
E. ₦27,500 (A)

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  • 10 Marks

MA – Dec 2023 – L2 – Q3a – Standard costing and variance analysis

This question involves calculating various cost and sales variances for Odumasi Ltd under a standard marginal costing system.

Odumasi Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product, which the company manufactures – ‘Tekie’. The system became operational on 1 March 2021.

The Management Accountant has consulted with the Senior Engineer and they have agreed on the following standard specifications to manufacture one unit of the product ‘Tekie’:

  • Direct materials: 4 kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour

According to the Marketing Director, Odumasi Ltd operates in an industry where the budgeted selling price is normally calculated to achieve a markup of 30% on cost. The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

The actual results for the month of March 2021 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000.
  • Production: 23,000 units.
  • Direct Materials: 90,000 kg @ GH¢162,000.
  • Direct labour: 48,000 hours @ GH¢576,000.
  • Variable overhead: GH¢350,000.

Required:
Calculate the relevant variances for March 2021 under the headings of sales, materials, labour, and overheads.

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  • 12 Marks

MA – May 2018 – L2 – Q5a – Standard Cost Variances Analysis

Calculate standard cost variances including sales price, material price, and labour efficiency.

The following information relates to product Jupiter, produced by Bfield Ltd during January. This represents the information that remains after a fire in the premises destroyed most of the accounting records.

Variances GH¢
Selling price 50,000 A
Materials price 28,500 F
Materials usage 7,500 A
Labour rate 18,700 F
Labour efficiency 20,400 A

Actual data

  • Sales (25,000 units at GH¢10) = GH¢250,000
  • Materials costs (112,500 kg at GH¢1.20) = GH¢135,000
  • Labour costs (75,000 hrs. at GH¢1.9) = GH¢142,500

There was no opening or closing inventories.

Required:
Calculate the following:
i) Standard selling price per unit; (3 marks)
ii) Standard cost of material per kilogram; (3 marks)
iii) Standard kilograms of materials required per unit; (2 marks)
iv) Standard labour rate per hour; (2 marks)
v) Standard hours of labour required per unit. (2 marks)

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  • 10 Marks

MA – April 2022 – L2 – Q3a – Standard costing and variance analysis

Prepare a standard cost card and calculate variances for Plytimba's recent financial period.

Plytimba manufactures high-quality wooden chairs using odum sourced from sustainable forests. The company began trading two years ago having identified a niche market for the product.

During the year, Plytimba was forced to purchase wood from a different company as the usual supplier did not have sufficient stock available. The company operates a standard variable costing system and details relating to the most recent financial period are shown below.

Budgeted Information:

  • Production in units: 134,400
  • Direct materials: 10,080 square metres odum wood = GH¢282,240
  • Direct labour: 33,600 hours = GH¢483,840
  • Variable production overhead (based on direct labour hours): GH¢225,792
  • Fixed production overhead: GH¢29,200

Actual Information:

  • Production in units: 135,000
  • Direct materials: 10,800 square metres odum wood = GH¢300,240
  • Direct labour hours: 27,000 hours = GH¢486,000
  • Variable production overhead: GH¢194,400
  • Fixed production overhead: GH¢30,150

Required:

i) Prepare a Standard Cost Card for one wooden chair. (4 marks)

ii) Calculate SIX (6) variances in as much detail as the information above permits. (6 marks)

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  • 9 Marks

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

You have been asked as a cost accountant to reconcile the Budgeted profit to the actual profit using the variance report generated by the management accountant.

i. Calculate the sales variances (2 marks)
ii. The total material variance (1 mark)
iii. The total wage variances (1 mark)
iv. Total manufacturing overhead variances (1 mark)
v. Reconciliation of Budget profit to the actual profit (4 marks)

(Total = 9 marks)

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  • 15 Marks

MA – Nov 2016 – L2 – Q4a – Standard costing and variance analysis

Calculate various sales, material, labour, and overhead variances for Jungle Twist Ltd based on the provided data.

Jungle Twist Ltd manufactures quality blocks for the housing industry in Ghana. It operates a standard marginal costing system. The following standard costs, volume, and revenue data for the quarter ending 31 October 2015 are provided:

Standard cost card:

  • Selling price: GH¢18 per block
  • Costs:
    • Direct material P: 3 kg at GH¢2.60 per kg
    • Direct material Q: 2 kg at GH¢2.50 per kg
    • Direct labour: 2 hours at GH¢0.60 per hour
    • Variable overheads: GH¢0.50 per direct labour hour
  • Budgeted sales for the quarter: 62,500 blocks
  • Variable overheads are absorbed at the rate of GH¢0.50 per direct labour hour.
  • Fixed production overhead for the quarter is estimated to be GH¢78,500.

The following actual results were recorded for the quarter just ended 31 October 2015:

  • Production: 60,000 blocks
  • Sales: 58,000 blocks
  • Selling price: GH¢17.00 per block
  • Direct material P: 150,000 kg were bought and used at GH¢360,000
  • Direct material Q: 109,000 kg were bought and used at GH¢327,000
  • Direct labour: 108,000 hours were worked for at a cost of GH¢90,400
  • Variable overheads: GH¢82,000
  • Fixed production overheads: GH¢80,000

Required:
Calculate the following variances for the quarter just ended 30 September 2015:

i) Sales volume and sales price variances; (3 marks)

ii) Price and usage variances for each material; (3 marks)

iii) Mix and yield variance for each material; (3 marks)

iv) Labour rate, labour efficiency, and idle time variances; (3 marks)

v) Variable overheads expenditure and variable overheads efficiency variances. (3 marks)

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  • 20 Marks

IMAC – DEC 2022 – L1 – Q3 – Scope of Management Accounting | Standard Costing and Variance Analysis

Explanation of responsibility accounting classifications, reasons for full costing, and calculation of material, labour, and overhead variances.

a) Responsibility Accounting is a system of accounting in which costs are identified with persons who are primarily responsible for making decisions about the costs in question. Responsibility Accounting classifies cost under two main headings.

Required:
Explain the TWO (2) classifications of cost under Responsibility Accounting. (2 marks)

b) Full costing is an accounting method used to determine the complete end-to-end cost of producing products or services. Accountants use the term full cost to mean more than a product’s manufacturing or production costs (including fixed manufacturing overhead).

Required:
Explain FOUR (4) reasons full cost of a product or service may be calculated. (8 marks)

c) Afram Ltd has just introduced a standard marginal costing system to assist in the planning and control of the production activities for its single product, Amino. The system became operational on 1 January 2022. The Functional Director responsible for cost and management accounting had a discussion with the Production Manager, and both have agreed on the following standard cost information to manufacture one unit of product, Amino.

Budgeted cost:

  • Direct materials: 4kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour.

Actual Results:
The actual results for January 2022 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000
  • Production: 23,000 units
  • Direct Materials: 90,000 kgs at a cost of GH¢162,000
  • Direct labour: 48,000 hours at a cost of GH¢576,000
  • Variable overhead: GH¢350,000

The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

Required:
Calculate the following variances:
i) Direct Material Price
ii) Direct Material Usage
iii) Direct Labour Rate
iv) Direct Labour Efficiency
v) Variable Overhead Efficiency (10 marks)

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