Caribbean LED produces solar lights at its Barbadian plant. The standard cost card for a standard outdoor light shows that 2 kg of direct materials and 2.5 hours of direct labour are required for each unit. Both fixed and variable manufacturing overhead are applied on the basis of direct labour-hours. The following information is available from the accounting records. Standard cost of labour is $ 6.40 per hour
There was 500 kg of direct materials in beginning inventory. The actual cost of 35,000 kg of direct material purchased was $700,000. The actual cost of the material was $1.50 higher than the budgeted per unit due to a shortage of the material on the market. The ending inventory of material was 1,500 kg. The actual labour cost for the production of solar light was $267,265. The standard cost of labour for the units produced is $240,000. Actual variable overhead cost incurred is $503,020. The standard variable overhead applied to WIP is $475,000 and the fixed overhead applied to WIP was $528,000. The actual fixed overhead cost was $515,000 and the fixed overhead budget variance was $7,000F. If the company had been using a normal costing system, $496,000 would have been the variable overhead allocated to the WIP.
Required Based on the above information, calculate the following: a). The materials price variance. b). Actual quantity of output produced c). Direct materials quantity variance d). Variable overhead efficiency variance e). Variable overhead spending variance. f). Direct labor rate variance f). Direct labor efficiency variance g). Flexible budget fixed overhead costs. h). Budgeted fixed overhead application rate i). Denominator level of activity j). Calculate and interpret the production volume variance.
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