# Calculate Cost Variance And Fixed Overhead Variance Analysis

Question

Met Towels plc. produces and sells standard bath towels. The company uses a standard costing system; the standards in use for the latest month of production (January 2005) are as follows:

 Direct Material Usage 1.5 m2 of material per towel Direct Material Cost £2 / m2 Direct Labor Usage 0.1 hour per towel Direct Labor Cost £7.50 / hour Machine Hours Usage 3 minutes per towel

For the month of January 2005, the company expected to produce 100,000 towels and use £240,000 in variable overhead and £155,000 in fixed overhead. The costing system applies VOH using machine hours and FOH using direct labor hours.

At the end of January 2005, the company actually produced 100,000 towels. Additional actual information is as follows:

 Direct Material Used 135,000 m2 (amount used = amount purchased) Direct Material Cost £276,750 Direct Labor Hours 11,500 hours Direct Labor Cost £94,990 Machine Hours Used 290,000 minutes Variable Overhead £249,400 Fixed Overhead £140,000

Required: Prepare a full cost variance analysis for Met Towels in January 2005.

Required:

1. Prepare a cost variance analysis for each variable cost component for Met Towels in January 2005.
2. Prepare a fixed overhead variance analysis for Met Towels in January 2005.

Summary

The question belongs to Accounting and it discusses about calculation of cost variance analysis for variable cost component and fixed overhead variance analysis.

Total Word Count 261

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