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- September 30, 2017 at 3:56 pm #409080
Hi John,
Thank you for the reply. I have overlooked some of my figures. Below is the question I am stuck with, I have tried to work through the notes but struggle to find anything similar to this. I have been asked to calculate the labour time and efficiency variance, the material usage variance, the fixed O/H volume and expenditure variance, the variable o/h expenditure and efficiency variance and the admin volume and expenditure variance. I have calculated all of the overhead variances correctly using your notes. But I am struggling with the labor and material variances.
Anderson Ltd. manufacture gearboxes for use in cars. At the start of the
year, the management of Anderson Ltd. estimated that its costs would be:
This was based on the following:
80 employees
2000 hours worked by each employee
40 000 gearboxes manufactured in the year as budgeted production
£200 unit selling price.% of sales value
Direct labour 8
Direct material 50
Variable production overhead 8
Fixed production overhead 12
Administration overhead 5You have recently been employed by the company to establish a standard
costing system. At the end of the year you were able to extract the
following information:
• labour costs £4.40/hour
• 32 000 units sold
• £210/unit selling price
• 160 000 hours were worked
• variable production overheads were £640 000
• fixed production overheads were £810 000
• administration costs were £350 000
• raw material prices were 10% higher than expected
• total expenditure on raw material was £3.696 M
• there were no opening or closing stocks of raw materials.Budgeted Cost
unit cost
£ £
Direct labour £16
Direct materials £100
Variable overhead £16
Fixed overhead £24
£156Admin overhead £10
Total £166
Selling price £200.00
Standard Profit / unit £34.00Budgeted Profit £1,360,000.00
Sales Price Variance £320,000.0 F
Sales Quantity Variance -1,680,000.0 AStandard Cost £640,000
Actual Cost £640,000Expenditure Variance 0.0
Efficiency Variance 0.0
Fixed overheads
Expenditure Variance -£150,000.0
Volume Variance -£192,000.0
Admin Overhead
Expenditure Variance -£50,000.0
Volume Variance -£80,000.0
If you could point me in the right direction that would be great.
Thank you
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