Question One A company uses standard costing system. At the beginning of the year it adopted the… 1 answer below »

Question One A company uses standard costing system. At the beginning of the year it adopted the following standards: Input Total Direct material 3Kg@250/= Tzs. 750 Direct labour 5hours@750/= 3,750 Factory overhead: Variable Tzs.300/DLH 1,500 Fixed Tzs.400/DLH 2,000 Standard cost per unit 8,000 Normal volume per month is 40,000 standard DLHs. The company’s January flexible budget, set up on January 1st was on normal volume. The company’s actual January production was 7800 units. The records for January indicated the following: Direct material purchased 25000Kgs at Tzs.260/Kg; Direct material consumed 23000Kgs, Direct labour 40100 hours at Tzs.730/hour. Factory overhead: Variable Tzs.12,000,000; Fixed Tzs.18,000,000. You are required:
1. Prepare a schedule of total standard production cost of 7800 units in January
2. For the month of January, compute the following variances, indicating whether each is favourable or unfavourable. Each calculated item, you are required to prepare Journal entry. Also, give reason why there is variance and prepare variance account.
i. Direct material price, based on purchases
ii. Direct material efficiency (usage)
iii. Direct labour rate
iv. Direct labour efficiency
2
v. Variable overhead spending
vi. Variable overhead efficiency
vii. Fixed overhead expenditure
viii. Production volume.
Question Two
Keko furniture Ltd is an elite desk manufacturing company. It makes two products as follows:
Executive desks: – 3 feet x 5 feet mninga desks
Chairman desks: – 6 feet x 4 feet mvule desks
The budgeted direct cost inputs for each product in 2015 are:
Executive line Chairman line
Mninga top 16 square feet 0
Mvule top 0 23 square feet
Mninga legs 4 0
Mvule legs 0 4
Direct manufacturing labour 3 hours 5 hours
Unit data pertaining to direct materials for March 2015 are:
Actual beginning direct materials inventory at 1st March, 2015
Executive line Chairman line
Mninga top (square feet) 320 0
Mvule top (square feet) 0 150
Mninga legs 100 0
Mvule legs 0 40
Target ending direct material inventory 31st March, 2015
Executive line Chairman line
Mninga top (square feet) 192 0
Mvule top (square feet) 0 200
Mninga legs 80 0
Mvule legs 0 44
Unit cost data for direct cost input pertaining to February 2015 and March 2015 are:
February March
(Actual TZS) (Budgeted TZS)
Mninga top (square feet) 18 20
Mvule top (square feet) 23 25
Mninga per leg 11 12
Mvule per leg 17 18
Manufacturing labour cost per hour 30 30
Manufacturing overhead (both variable and fixed) is allocated to each desk on the basis of
budgeted direct manufacturing labour-hours per desk. The budgeted variable overhead rate for
March is TZS.35 per direct manufacturing labour hour. The budgeted fixed manufacturing
overhead for March 2015 is TZS.42,500. Both variable and fixed manufacturing overhead costs
are allocated to each unit of finished goods. Data relating to finished goods inventory for March
2015 are:
Executive line Chairman line
Beginning inventory in units 20 5
Beginning inventory in TZS 10,480 4,850
Target ending inventory in units 30 15
3
Budgeted sales for March 2015 are 740 units of executive line and 390 units of the chairman line. The budgeted selling prices per unit in March 2015 are TZS 1,020 for the executive line desk and TZS 1,600 for the chairman line desk assume the following in your answer:
1. Work-in-process inventories are negligible and ignored
2. Direct materials inventory and finished goods inventory are cost using FIFO method
3. Unit costs of direct materials purchased and finished goods are constant in March 2015.
Required: Prepare the following budgets for March 2015
a) Revenue budget
b) Production budget in units
c) Direct materials usage budget and direct materials purchases budget
d) Direct manufacturing labour budget
e) Manufacturing overhead budget
f) Ending inventory budget
g) Cost of goods budget.