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FarmFresh produces luxury Easter picnic baskets (6 per box) which has the following standard cost per box :

/ Unit

Direct Material (on average) 4 kg @ 12 per kg 48

Direct Wages - 5 hrs @ 7 per hour 35

Variable prodn. ohd - 5 hrs @ 2 per hour 10

Fixed prodn ohd - 5 hrs @ 10 per hour 50

Variable production overhead is deemed to vary with the hours worked.

During the period the Actual results were as follows :

Production 18,000 Units

Direct Material 76,000 kg costing 836,000

Direct Wages 84,000 hrs worked 604,800

Variable prodn overhead 84,000 hrs worked 172,000

Fixed production overhead 1,030,000

TOTAL 2,642,800

Required :

a) Using the information above calculate the sub variances for Materials, Wages and Variable overheads. (6 marks)

Fixed overheads are absorbed into production on the basis of standard hours of production and the normal volume of production for the period is 20,000 units (100,000 hours of production)

b) Using the information above on the budgeted fixed overheads calculate the fixed overhead expenditure and volume variances. (1 mark)

c) Put all 8 calculated sub- variances into a schedule which reconciles Actual (2,642,800) to Standard cost (2,574,000). (1 mark)

d) Comment briefly on the usefulness to management of investigating variances. (2 marks)

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