Liverpool Manufacturing Limited developed the following standard costs for direct material and direct labour for one of their major products, the 45 litres heavy-duty plastic container. Each container requires the following: Types of Cost Standard quantity Standard price Direct materials 0.2 kilos £30 per kilo Direct labor 0.1 hours £17 per hour During June, Liverpool Manufacturing Limited produced and sold 10,000 containers using 2,100 kilos of direct materials at an average cost per kilo of £25 and 1,100 direct labor hours at an average wage of £16 per hour. Required: a) Calculate the following variances for June: į Direct material price variance ii. Direct material quantity variance iv. Direct labour rate variance v. Direct labour efficiency variance b) Briefly comment on the material and labor variances calculated in a) c) Evaluate the importance of standard costing in budgeting process within firms
Liverpool Manufacturing Limited developed the following standard costs for direct material and direct labour for one of their major products, the 45 litres heavy-duty plastic container. Each container requires the following: Types of Cost Standard quantity Standard price Direct materials 0.2 kilos £30 per kilo Direct labor 0.1 hours £17 per hour During June, Liverpool Manufacturing Limited produced and sold 10,000 containers using 2,100 kilos of direct materials at an average cost per kilo of £25 and 1,100 direct labor hours at an average wage of £16 per hour. Required: a) Calculate the following variances for June: į Direct material price variance ii. Direct material quantity variance iv. Direct labour rate variance v. Direct labour efficiency variance b) Briefly comment on the material and labor variances calculated in a) c) Evaluate the importance of standard costing in budgeting process within firms
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
Section: Chapter Questions
Problem 20E: Jameson Company produces paper towels. The company has established the following direct materials...
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