Conferno Ltd. has provided you with the following

Subject: Business    / Management    

Question

Conferno Ltd. has provided you with the following production information for further analysis:

Budgeted Costs (per unit) €/£ Direct Materials (15kg at €/£2/kg) 30 Direct Labour (2hours at €/£10/hr) 20 Variable Overhead (2 x €/£5/hr) 10 Fixed Overhead (2 x €/£10) 20 Total Cost 80

Budgeted Variable Overhead €/£150,000 Budgeted Fixed Overhead €/£200,000

Fixed and Variable overhead are absorbed on the basis of direct labour hours which are estimated to be 20,000 per month.

Actual Cost Results €/£ Direct Materials (14,000 kg) 210,000 Direct Labour (17,500 hours) 192,500 Variable Overhead 100,000 Fixed Overhead 190,000

Conferno had budgeted for sales of 10,000 units at a price of €/£110 per unit, but reports that actual sales revenue was €/£1,080,000 for 9,000 units.

Requirement

(a) Calculate the following variances:

(i) Sales Price Variance (ii) Sales Volume Profit Variance (iii) Material Price Variance (iv) Materials Usage Variance (v) Labour Rate Variance (vi) Labour Efficiency Variance (vii) Variable Overhead Expenditure Variance (viii) Variable Overhead Efficiency Variance

12 Marks (b) Calculate the following fixed overhead variances:

(i) Fixed Overhead Expenditure Variance (ii) Fixed Overhead Volume Variance (iii) Fixed Overhead Volume Efficiency Variance (iv) Fixed Overhead Volume Capacity Variance

8 Marks