FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Yellow Ltd, a food manufacturer, is reviewing its operation for March
2021. The company produces only one product, called YM.
The following standard revenue and cost data per unit of the product is
available:
Production and sales 90,000 units
Selling price £24.00
Direct material (4 kg at £2.50 per kg) £10.00
Direct labour (0.5 hrs at £14.00 per
hour)
£7.00
Fixed production
Actual data for March 2021 was as follows:
Production and sales 84,000 units of YM were produced and sold
at £24.50 each.
Direct material 378,000 kg were used at a total cost of
£869,400.
Direct labour 50,400 labour hours were worked at a total
cost of £655,200.
Fixed production
overheads
Fixed production overheads were £240,000.
There were no inventories at the start or end of March 2021.
Required:
(a)Calculate the following variances:
• Material price and usage variances
• Labour rate and efficiency variances
(b)Suggest possible explanations for the variances you have calculated in
part (a). In your answer, ensure to discuss about the possible
relationships between material and labour variances
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