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D2- 1. Choc Co is a company which manufactures and sells three types of biscuits in packets. One of them is called ‘Ooze’ and contains three types of sweeteners: honey, sugar and syrup. The standard materials usage and cost for one unit of ‘Ooze’ (one packet) is as follows: $ Honey 20 grams at $0·02 per gram 0·40 Sugar 15 grams at $0·03 per gram 0·45 Syrup 10 grams at $0·025 per gram 0·25 In the three months ended 30 November 2011, Choc Co produced 101,000 units of ‘Ooze’ using 2,200 kg of honey, 1,400 kg of sugar and 1,050 kg of syrup. Note: there are 1,000 grams in a kilogram (kg). Choc Co has used activity-based costing to allocate its overheads for a number of years. One of its main overheads is machine set-up costs. In the three months ended 30 November 2011, the following information was available in relation to set-up costs: Budget Total number of units produced 264,000 Total number of set ups 330 Total set-up costs $52,800 Actual Total number of units produced 320,000 Total number of set ups 360 Total set-up costs $60,000
Required: (a) Calculate the following variances for materials in Ooze: (i) Total materials usage variance; (ii) Total materials mix variance; (iii) Total materials quantity (yield) variance. (b) Calculate the following activity-based variances in relation to the set-up cost of the machines: (i) The expenditure variance; (ii) The efficiency variance. (c) Briefly outline the steps involved in allocating overheads using activity based costing. |