Answer Happy

Build Co is a company that carries out contracting work. One of the jobs carried out in February was job 1357, to which the following information relates: Direct material Y: 400 kilos were issued from stores at a cost of $5 per kilo. Direct material Z: 800 kilos were issued from stores at a cost of $6 per kilo. 60 kilos were returned. Department P: 320 labour hours were worked, of which 100 hours were done as overtime. Department Q: 200 labour hours were worked, of which 100 hours were done as overtime. Overtime work is not normal in department P, where basic pay is $8 per hour plus an overtime premium of $2 per hour. Overtime work was done in department Q in February because of a request by the customer of another job to complete his job quickly. Basic pay in department Q is $10 per hour and the overtime premium is $3 per hour. Overhead is absorbed at the rate of $3 per direct labour hour in both departments. Required: Determine:

a) The direct materials cost of job 1357

b) The direct labour cost of job 1357

c) The full production cost of job 1357


Question Information

.............................. Standard cost information Actual cost information Material $ 1*per unit 35,000kg @ $34,000 Labour $1.5* 2hrs per unit 17,000kg @ $30,000 Variable overhead $0.5*2hrs per unit $9,000 Fixed overhead $2*(2hrs*10,000 units) $40,000 Production Budgeted 10,000 units Actual 9,000 units Using the information above:

a) Determine the i. Material usage and price variances ii. Labour rate and efficiency variances iii. Variable overhead and efficiency variances

b) For each of the above variances, give a reason for the variance.