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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

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Solution

To calculate the variable manufacturing sales volume variance, we need to compare the budgeted variable overheads with the actual variable overheads.

The budgeted variable overheads are based on the budgeted capacity of 1,300 units. The variable overhead rate is calculated as total variable overheads divided by budgeted capacity, which is R4,875 / 1,300 = R3.75 per unit.

The actual variable overheads are based on the actual production of 1,500 units. The actual variable overhead rate is calculated as total actual variable overheads divided by actual production, which is R6,000 / 1,500 = R4 per unit.

The variable manufacturing sales volume variance is calculated as (budgeted variable overhead rate - actual variable overhead rate) x actual production, which is (R3.75 - R4) x 1,500 = -R375.

Since the variance is negative, it is unfavorable (U). However, none of the options provided match this calculation. It's possible there may be a mistake in the question or the provided options.

This problem has been solved

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