Direct cost variances

XYZ Ltd is planning to make 120,000 units per period of a new product. The following standards have been set:

 

Per unit

Direct material A

1.2 kg at £11 per kg

Direct material B

4.7 kg at £6 per kg

Direct labour:

 

Operation 1

42 minutes

Operation 2

37 minutes

Operation 3

11 minutes

All direct operatives are paid at the rate of £8 per hour. Attainable work hours are less than clock hours, so the 500 direct operatives have been budgeted for 400 hours each in the period.

Actual results for the period were:

Production

126,000 units

Direct labour

cost £1.7 m for 215,000 clock hours

Material A

cost £1.65 m for 150,000 kg

Material B

cost £3.6 m for 590,000 kg

Requirements

(a) (i) A realistic labour efficiency variance for the period is £ _____________

Adverse _____________

Favourable ___________

(ii) The labour rate variance for the period is £ _____________

Adverse _____________

Favourable ___________

(b) (i) The material price variances for the period are

Material A £ _____________

Adverse _____________

Favourable ___________

Material B £ _____________

Adverse _____________

Favourable ___________

(ii) The material usage variances for the period are:

Material A £ _____________

Adverse _____________

Favourable ___________

Material B £ _____________

Adverse _____________

Favourable ___________