QUESTION 2
(27 Marks)
Troublesome Ltd produces a single product. The company uses a standard absorption
costing system and at the beginning of the year a budget was drawn up for the
production of 9 000 units at the following standard cost per unit:
Direct material 0.10 kg at N$50 per kg
Direct labour one labour hours at N$25 per hour
Variable overheads½ machine hour at N$16 per hour
The actual costs recorded were as follows:
• Total direct material was 800 kg at N$49 per kg.
• 7 700 direct labour hours at N$26 per direct labour hour
• Variable overheads, N$60 750
• Actual machine hours, 4 050 hours.
• Actual production, 7 800 units.
5
25
§
---3..8
REQUIRED:
Compute the following:
a) Direct material quantity variance
b) Direct material price variance
c) Total material variance
d) Direct labour efficiency variance
e) Direct labour rate variance
f) Total labour variance
g) Variable production overhead expenditure variance
h) Variable production overhead efficiency variance
i) Total variable production variance
(3 marks each)
2