Chartered University College

FMA
Management Accounting
EXAMINER: MKM
(CLASS TEST: 4)
TIME ALLOWED: 36 mins
TOTAL MARKS: 30
--------------------------------------------------------------------------------------------STUDENT NAME

STUDENT ID -...........................

STUDENT SIGNATURE ..
MARKS GAIN (%) -

STATUS

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McDermott plc is a manufacturer of beds. It uses a standard absorption costing

system to monitor performance of managers and departments. A standard
absorption cost card for one of its models, the Dreamer, is given below.

Selling price
25000
Production costs
Direct material: 12 metres at 150 per metre
1800
Direct labour: 4 hours at 600 per hour
2400
Variable overhead: 4 hours at 1500 per hour
6000
Fixed overhead: 4 hours at 1000 per hour
4000

(14200)

Gross profit
10800
Budgeted production and sales are 1,000 Dreamers per month.
Actual results for the manufacture and sale of Dreamers for the most recent
month were as follows:
Sales: 1,200 beds at 240 each.
Production: 1,300 beds
Direct material (purchased and used): 16,000 metres at 140 per metre
Direct labour (worked and paid): 5,000 hours at 600 per hour
Variable overhead 75,500
Fixed overheads 54,600.
There were no opening stocks of finished goods.
Required:
(a)Calculate the following variances for the most recent month(2 MARKS EACH)

(1) direct material price ________________________

(2) Direct material usage________________________
(3) Direct labour rate___________________________
(4) Direct labour efficiency_________________________
(5) Variable overhead expenditure_______________________
(6) Variable overhead efficiency__________________________
(7) Fixed overhead expenditure__________________________
(8)Fixed overhead capacity_________________________
(9) Fixed overhead efficiency______________________
(10) Sales volume (in terms of profit)_____________________
(11) Sales price ___________________________
(b) STATE one cause each for FOR THE FOLLOWING variances ----(12) SALES VOLUME VARIANCE _______________________
(13)LABOUR RATE VARIANCE _________________________
(14)FIXED OVERHEAD CAPACITY VARIANCE_______________________
(15)MATERIAL USAGE VARIANCE __________________________
(2 MARKS EACH)