Mokgomme limited uses standard absorption costing system. The company budgeted the following figures for January 2022 for capacity of 1 300 units. Standard cost for one unit R Direct materials (2,5kg at R6 per Kg) 15 Direct labour (45 minutes at R35 per hour) 26.25 Total direct costs 41.25 Total manufacturing overheads 6 825 Manufacturing overheads (variable) 4 875 Manufacturing overheads (fixed) 1 950 During the month, the company started and completed 1 500 units. The following actual transactions have been recorded for the month: Cash purchase of material of 2 680 kg at R13 400 Materials issued to production 2 600 Direct wages paid: 30 minutes at R37 per hour Manufacturing overheads incurred: variable: R6 000 Fixed: R2 700 Manufacturing overheads (both fixed and variable) are absorbed based on labour hours worked. Question 11 (4.625 points) Variable manufacturing sales volume variance amounts of Mokgomme Limited to: Question 11 options: R1 875F R1 875U R5 650F Never a variance
Question
Mokgomme limited uses standard absorption costing system. The company budgeted the following figures for January 2022 for capacity of 1 300 units.
Standard cost for one unit R
Direct materials (2,5kg at R6 per Kg)
15
Direct labour (45 minutes at R35 per hour)
26.25
Total direct costs
41.25
Total manufacturing overheads
6 825
Manufacturing overheads (variable)
4 875
Manufacturing overheads (fixed)
1 950
During the month, the company started and completed 1 500 units. The following actual transactions have been recorded for the month:
Cash purchase of material of 2 680 kg at R13 400 Materials issued to production 2 600 Direct wages paid: 30 minutes at R37 per hour Manufacturing overheads incurred: variable: R6 000 Fixed: R2 700
Manufacturing overheads (both fixed and variable) are absorbed based on labour hours worked.
Question 11 (4.625 points) Variable manufacturing sales volume variance amounts of Mokgomme Limited to:
Question 11 options:
R1 875F
R1 875U
R5 650F
Never a variance
Solution
To calculate the variable manufacturing sales volume variance, we first need to determine the standard variable overhead rate. This is done by dividing the budgeted variable overheads by the budgeted labour hours.
The budgeted variable overheads are R4,875. The budgeted labour hours are calculated as follows: 45 minutes per unit x 1,300 units = 58,500 minutes or 975 hours.
So, the standard variable overhead rate is R4,875 / 975 hours = R5 per hour.
Next, we calculate the standard hours for actual production. This is done by multiplying the actual units produced by the standard hours per unit. The actual units produced are 1,500. The standard hours per unit are 45 minutes or 0.75 hours. So, the standard hours for actual production are 1,500 units x 0.75 hours/unit = 1,125 hours.
The variable manufacturing sales volume variance is then calculated as follows: (Standard hours for actual production - Budgeted hours) x Standard variable overhead rate. This gives us: (1,125 hours - 975 hours) x R5/hour = R750F.
Therefore, none of the options provided are correct. The variable manufacturing sales volume variance is R750F.
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