In the accounting department of Frobisher Company, a manufacturing company that produces a popular consumer product. You typically prepare the variance analysis report and present it to the management committee for their review. Unfortunately, the accounting system has been down and the information you have is incomplete. However, you want to impress the management committee by preparing the variance analysis on a timely basis.
You recall that manufacturing overhead cost is applied to production on the basis of direct-labour hours and that all of the materials purchased during the period were used in production. The standard costs for production are presented as follows:
Direct materials, 9 kilograms @ $3.00 per kilogram $27.00
Direct labour, 1.2 direct labour hours @ $15.00 per direct labour hour 18.00
Variable manufacturing overhead, 1.2 direct labour hours @$3.00 per direct labour hour 3.60
Fixed manufacturing overhead, 1.2 direct labour hours @$7.00 per direct labour hour 8.40
$57.00
The following table presents the information and analysis that you had generated before the accounting system went down:
Total Standard Cost Price or Rate Variance Spending or Budget Variance Quantity or Efficiency Variance
Volume Variance
Direct materials $202,500 $3,450F $4,500U
Direct labour $135,000 $7,275U $10,500U
Variable manufacturing overhead
$27,000
$650F
Fixed manufacturing overhead
$63,000
$250F
$7,000U
In order to be prepared for the management committee meeting, you want to generate the missing variances and also have the necessary "backup" data ready.
Required:
1. How many units were produced last period?
2. How many kilograms of direct material were purchased and used in production?
3. What was the actual cost per kilogram of material?
4. How many actual direct-labour hours were worked during the period?
5. What was the actual rate paid per direct labour hour?
6. How much actual variable manufacturing overhead was incurred during the period?
7. What is the total fixed manufacturing overhead cost in the company's flexible budget?
8. What were the denominator direct labour hours for the last period?