ADVANCED COSTING AND MANAGEMENT ACCOUNTING

A car engine manufacturer is trying to make an assessment of its operations for the past year. The
entity operates a standard marginal costing system and manufactures a state-of-the-art engine for
which the following standard revenue and cost data per unit of product is available:
Selling price $60.00
Direct material A 2.5 kg at $8.50 per kg
Direct material B 1.5 kg at $6.00 per kg
Direct labour 0.45 hrs. at $30.00 per hour
Actual data for the twelve-month period was as follows:
Sales and production 48,000 units of the blaster were produced and sold for $2,904,000
Direct material A 121,900 kg were used at a cost of $1,005,675
Direct material B 67,200 kg were used at a cost of $420,000
Direct labour Employees worked for 18,900 hours, but 19,200 hours were paid at a cost

of $585,600.

Budgeted sales for the period were 50,000 units of Product Blaster. A recession last year meant
that the market for the product declined by 5%.
Required:
(a) Calculate the following variances.
(i) Sales volume variance.