QUESTION 1 -
Havana Limited plans to sell 10 000 units during the period 1 October to 31 December 2016.
Additional information is given below:
Inventory levels are as follows:
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|
30 September 2016
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31 December 2016
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|
Completed products
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1 000 units
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2 000 units
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|
Raw material X
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10 000 kg
|
5 000 kg
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|
Raw material Y
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8 000 kg
|
10 000 kg
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- All inventory is issued according to the FIFO method
- Three labour hours are needed to manufacture one completed unit. Workers earn N$20 per hour
- The cost of raw material X is N$1.35 per kg. Raw material Y is purchased at N$0.50 per kg
- Two kg of raw material X and Three kg of raw material Y are required for the production of one unit of the finished product
- Manufacturing overhead costs are allocated at a rate of N$6 per direct labour hour
- Finished products are sold at N$150 per unit
REQUIRED: Using the Information Above Prepare The Following Budgets
- Sales Budget
- Production Budget
- Raw Materials Purchases Budget
- Labour Budget
- Closing Inventory Budget (All Closing Inventories)
- Cost of Goods Manufactured and Cost of Goods Sold Budget in total Value for the last quarter
QUESTION 2 -
Tsumeb Leather Cc manufactures and sells a single product and uses a standard costing system. The standard costs were set as follows for the current accounting period:
N$
40 Kg of Material @ N$2.5 60 000
25 hours of Direct Labour @ N$3.8 107.50
Overheads: 30 Machine Hours at N$2.5 75.00
Standard Cost 242.50
Actual Results:
Material Purchased: 90 000 Kg @ N$2.55 per Kg (all Material Purchased was Issued to production)
Direct Labour Cost: 54 000 Hours @ N$4 per hour
Actual Overheads cost: N$ 20 000
Credit Sales: 1950 units @ N$350.00 per unit
2000 units were produced.
REQUIRED: Calculate The Following:
- Material Price Variance
- Material Quantity Variance
- Labour Rate Variance
- Labour Efficiency Variance
- Give any three reasons that cause labor rate variance obtained in 5.3
- List any three advantages of standard costing