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Goodmonth Tyre Co. uses a standard cost system for its tyres. The company has a normal capacity of 20,000 DL hours. The costs are as follows:
Standard Costs
Actual Costs
Direct Materials
5 kg. of plastic at £2.40/kg.
6 kg. of plastic at £2.50/kg.
Direct Labor
5 hrs./unit at £10.00/hr.
27,500 hours, £288,750 total payroll
Overhead
Budgeted Fixed:£12,500
Fixed: £31,200,
Variable: £20,000
Variable Rate:£1.50/DL hour
During February, 5,000 units were scheduled and produced.
Required
a). Find the fixed rate for manufacturing overhead.
b). Compute the following cost variances for the month of February:
1) Direct materials price variance
2) Direct materials quantity variance
3) Direct labor rate variance
4) Direct labor efficiency variance
5) Overhead variance - spending
6) Overhead variance - volume
c). State causes for each.
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