Accounting

Original Budget

Actual

Flexible Budget

Units Produced (in units)

10,000

12,000

Materials used (kg)

400

700

Material cost ($)

8,000

See purchases

Direct Labour (hours)

35,000

46,102

Direct Labour ($)

385,000

507,080

Variable Overhead ($)

350,000

419,161

Fixed Overhead ($)

160,000

161,000

Other Information

Overhead is Allocated on Direct Labour Hours

During the year, 800 kg of materials were purchased for $5,000

Beginning Inventory: none

Ending Inventory: 100kg

Required:

Calculate the flexible budget amounts for all items.

Calculate the following variances

Material Rate
Material Efficiency
Labour Price
Labour Efficiency
Variable Overhaed Rate
Variable Overhead Efficiency
Fixed Overhead Rate
Fixed Overhead Production Volume
Assume that the Material, Labour and Variable Overhead variances are inter-related. What is the most likely single cause of these variances. Briefly explain your answer.