Deadeye Ltd operates a standard costing system in which all stocks are valued at standard cost. The standard direct material cost of one unit of product MS is £36, made up of 4.8 kg of material H at £7.50 per kg. Material H is used only in the manufacture of product MS. The following information relates to last month: 

Material H: 

Purchased 40,000 kg for ........................................................ £294 000 

Issued into production .......................................................... 36,500 kg 

Finished output of MS ............................................................. 7200 units

Required

1. Calculate the direct material price and usage variances for last month. 

2. Prepare a statement that reconciles the actual cost of material H purchased with the standard material cost of actual production of MS for last month. The statement should incorporate the variances calculated in 1. 

3. a. Suggest ONE possible cause for EACH of the variances calculated in 1. 

b. Who should the direct material price variance be reported to, and why?