During January, Microchem Ltd produced 1000 units of special product called Stylex, and the counting records indicated the following:
Direct material purchased ……………… 36 0000 kilograms @ $1.38 per kilogram
Direct material used …………………………………………….. 19 000 kilograms
Direct labour ………………………………………….4 200 hours @ $18 per hour
Stylex has the following standard prime costs:
Direct material: 20 kilograms @ $1.35 per kilogram ……………… $27.00
Direct labour hours 4 hours @ $17 per hour ………………………… 68.00
Standard prime cost per unit ……………………………………….. $95.00
Required:
1. Calculate the total standard direct material costs and direct labour costs for January.
2. For the month of January, calculate the following variances, indicating whether each is favourable or unfavourable:
(a) Direct material price variance.
(b) Direct material quantity variance.
(c) Direct labour rate variance.
(d) Direct labour efficiency variance.
3. Construct an Excel® spreadsheet to solve requirements 1 and. 2. Demonstrate how the solution will change if the following information changes: the standard direct labour rate is $20 per hour and the standard direct material price is $1.50 per kilogram?
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