Makwebo Plc, a premium food manufacturer, is reviewing operations for a three month period of
2009. The company operates a standard marginal costing system and manufactures one product,
XP, for which the following standard revenue and cost data per unit of product is available:
Selling price K12.00
Direct material A 2.5 kg at K1.70 per kg
Direct material B 1.5 kg at K1.20 per kg
Direct Labour 0.45 hours at K6.00 per hour
Fixed production overheads for the three-month period were expected to be K62, 500.
Actual data for the three-month period was as follows:
3 | P a g e
Sales and production
48,000 units of XP were produced and sold for K80, 800.
Direct material A
121,951 kg were used at a cost of K200, 000.
Direct material B
67,200 kg were used at a cost of K84, 000.
Direct labour
Employees worked for 18,900 hours, but 19,200 hours were paid at a cost of K117, 120.
Fixed production overheads
K64, 000.
Budgeted sales for the three-month period were 50,000 units of Product XP.
Required
Calculate the following variances
1. Sales volume contribution and sales price variances
2. Material price and usage variances for material A and B
3. Labor rate and efficiency variances
