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QUESTION

A company produces a product which has a standard variable production cost of $8 per unit made up as follows:

A company produces a product which has a standard variable production cost of $8 per unit made up as follows:

                                                               $ Per Unit

Direct material                                 $4.60 (2kg X $2.30 per kg)

Direct labour                                     $2.10 (0.7 hours x $3.00 per hour)

Variable overhead                          $1.3

Fixed manufacturing costs are treated as period costs. The following information is available for the period just ended,

Variable manufacturing cost of sales (at standard cost)                                  $263,520

Opening stock of finished goods (at standard cost)                                           $120,800

Closing stock of finished goods (at standard cost)                                              $146,080

Direct material price variance                                                                                    $2,571 unfavourable

Raw materials used in manufacture (at actual cost)                                          $170,310

Direct labour rate variance                                                                                          $4,760 unfavourable

Direct labour efficiency variance                                                                               $3,240 favourable

Required:

(a)   Determine for the period ended.

(i)                 The number of units produced.

(ii)               The raw material usage variance.

(iii)              The total actual direct labour cost, and

(iv)              The actual cost per kg of raw material used.

(b)   Outline the possible causes of the raw materials variances

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