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T Co usually has a quarterly labour cost of $2,500,000. Material costs (mainly copper) were $3,000,000 in January to March. The worldwide cost of copper has increased in the second quarter by 15%. Overheads were $45,000,000 in January to March.
Which two of the following variances for April to June are worth investigating as the reasons for the variance are unknown?
1. Sales volume variance of $3,000,000 favourable
2. Total direct labour variance of $400 adverse
3. Overhead expenditure variance of $4,000,000 adverse
4. Materials price variance of $450,000 adversei am having a hard time getting the answer for this, please help
Have you watched all my free lectures on variances?
(Our lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.)
There is not much point in investigating the labour variance – a difference of 400 out of a total of $2.5M is trivial.
There is not much point in investigating the materials price variance since we already know what the reason is – it is because the worldwide cost increased by 15%,
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