Rafter and Wood Industries established new facilities for its new product, and has been producing this new product during the past financial year. The company has maintained cost records identifying direct materials, direct labour and the overhead costs incurred.
The director of finance, having developed a professional relationship with you during your past projects with the company, invites you to make a critical review of their performance report for the department producing the new product. This performance report compares the actual output with the budgeted output, and shows the variances and the reasons for them.

You perform a thorough job and adjust any figures that appear to be wrong. The adjusted actual quantities and amounts are:

Number of units produced 12 000
Direct material used 281 000 metres at a total cost of $1 010 400
Direct labour 38 200 hours at a total cost of $753 500

You identify the following information from the budget document:

Planned units of production 11 000
Direct material cost per unit of product 23 metres of material at $3.60 per metre
Direct material cost per unit of product 3.25 hours at the rate of $19 per hour

? Show how the performance report for this department would appear.
? Identify the variances and the possible reasons for them.