Problem:
The following standards have been set to manufacture a product:
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Direct Materials:
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2 units of P at Rs. 4 per unit
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8.00
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3 units of Q at Rs. 3 per unit
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9.00
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15 units of R at Re. 1 per unit
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15.00
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32.00
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Direct Labour - 3 hrs @ Rs. 8 per hr
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24.00
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Total Standard prime cost
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56.00
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The company manufactured and sold 6,000 units of the product during the year. Direct materials cost is as follows:
12,500 units of P at Rs. 4.40 per unit.
18,000 units of Q at Rs. 2.80 per unit.
88,500 units of R at Rs. 1.20 per unit.
The company worked for 17,500 direct labour hours during the year. For 2,500 of these hours, the company paid at Rs. 12 per hour, while for the remaining the wages were paid at the standard rate.
Calculate material price and usage variances, and labour rate and efficiency variances.