B209: Oven Fresh Pte Ltd (“Oven Fresh”) Creates Freshly Baked Cakes Daily: Management Accounting Homework, RP, Singapore

University Republic Polytechnic (RP)
Subject B209: Management Accounting

Adapted from AY2016 Sem1 B209 ESE 

  • Oven Fresh Pte Ltd (“Oven Fresh”) creates freshly baked cakes daily.

The table below reports the budgeted information for 300 cakes for the month of July.

Budgeted Information:
Direct labor hours 900 hours
Direct labor hourly rate $12 / hour

Oven Fresh produced a total of 280 cakes in the month of Jul 2021.

Actual Information:
Direct labor hours incurred 920 hours
Total Direct labor cost $10,120

(a) Calculate the direct labor rate variance and state whether the variance is favorable or unfavorable. Show all your workings clearly.

(b) Calculate the direct labor efficiency variance and state whether the variance is favorable or unfavorable. Show all your workings clearly.

(c) Analyse the total direct labor variance and explain if Oven Fresh is doing well in controlling its labor cost.

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  • Love-Lettering Studio (“Love-Lettering”) conducts calligraphy lessons. Below are the budgeted costs for Jun 2021 based on the estimated number of lessons for the month.
Estimated number of lessons Duration of each lesson Salary for calligraphy instructors
100 2 hours $75 per hour

 

The actual number of lessons conducted in June 2021 was 95 lessons, and the calligraphy instructors were paid $14,630 in total for clocking 209 hours in that month.

Calculate the Total Direct Labour Variance for the month of June 2021; explain the favourability.

CHALLENGE YOURSELF QUESTION(S) 

Adapted from AY2017 Sem2 B209 ESE

 ScoopItz makes fresh tubs of ice cream daily for sale.

The table below shows the budgeted cost for 600 tubs of ice cream planned for production in June 2021.

Direct materials Price $6 per kg
Quantity 300 kg

 Additional Information for June 2021:

  • 650 tubs of ice cream were produced
  • The actual direct materials used was 350 kg
  • The actual direct materials cost was $2,240

3) Calculate the following variances and state whether the variance is favorable or unfavorable. Show your workings clearly.

  • The Direct Materials Price Variance
  • The Direct Materials Quantity Variance
  • In July 2021, ScoopItz arrived at a favorable Direct Labour Rate Variance and an unfavorable Direct Labour Efficiency Variance, leading to an overall unfavorable Total Direct Labour Variance.
  • Identify ONE (1)possible cause for the unfavorable Direct Labour Efficiency Variance.
  • State and explain whether the Human Resource Department should be rewarded for a favorable Direct Labour Rate Variance.

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