Questions by okey43 - Page 17
Question 2 (20 marks) S&K Limited (S&K) manufactures and sells tables in Hong Kong. S&K estimated to use 80 pounds of direct materials per unit, at the budgeted price of $4 per pound, and 2 hours of direct manufacturing labor per unit, at the budgeted rate of $28.60 per hour. S&K expected to produce 1,500 units. The budgeted fixed overhead is $20,000. Following are additional data for the month of March: Units completed 1,100 units Cost of direct material purchases $864,000 Direct materials purchases 320,000 pounds Direct materials efficiency variance $3,400 F Unexpectedly, the fifth wave of COVID-19 occurred. A total of 50 production workers suffered from COVID-19, so they could not come to work in March. S&K was not required to pay the absented workers. Each of the remaining 117 production workers worked 10 hours per day in the entire March, including Saturday and Sunday. The calendar of March 2022 is as follows: Sunday Monday 6 13 20 27 7 14 21 28 Tuesday 1 8 15 22 29 Wednesday Thursday 2 3 9 10 16 17 23 24 30 31 Friday 4. 11 18 25 Saturday 5 12 19 26 The law requires that workers must be paid at 200% of the regular pay rate for the hours worked over 8 hours per day from Monday to Saturday. They must also be paid at 300% of the regular pay rate on Sunday for the first 8 hours and 400% of the regular pay for the hours worked on Sunday over 8 hours. The regular pay rate is as expected when S&K prepares the budget. In addition, the company provides allowance of $5 per hour to workers who worked on Sunday. Due to the chaos in the factory, S&K hired additional three factory supervisors to coordinate the work in the factory. The salaries are $20,000 per supervisor in March. Although the remaining production workers were paid at a higher rate, they felt frustrated and tired. One of them was unsatisfied with the compensation provided by S&K. He broke one of the production machines. There were no beginning and ending inventories. Required: (a) Compute direct labor efficiency and rate (price) variance in March. (10 marks) (b) Calculate fixed overhead volume variance in March. (2 marks) (4 marks) (c) Explain the reason(s) for direct labor efficiency and rate (price) variance in March. Your answer must be specific to the information provided in the question. (d) Explain the reason(s) for fixed overhead volume variance. Your answer must be specific to the information provided in the question. (4 marks)