XYZ Ltd manufactures a single product, the standards of which are as follows:

The actual selling price was identical with the budgeted selling price and there were no opening or closing stocks during the period.
You are required to calculate the variances and reconcile the budgeted and actual profit for each of the following methods:
1. The traditional (or conventional) method.
2. The relevant cost method assuming materials are the limiting factor and materials are restricted to 1 0 000 kg for the period. ·
3. The relevant cost method assuming labour hours are the limiting factor and labour hours are restricted to 8000 hours for the period.
4. The relevant cost method assuming there are no scarce inputs.

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Standard per unit: Standard selling price Less standard cost Material (5 kg at 2 per kg) Labour (4 hours at 4 per hour) Variable overheads (4 hours at 1.50 per hour) Standard contribution *Variable overheads are assumed to vary with direct labour hours The following information relates to the previous month's activities: Production and sales Direct materials Direct labour Variable overheads Fixed overheads Profit Budget 2000 units 10000 kg at 2 per kg 8000 hours at 4 per hour 12000 12000 28000 () () 22 10 168 1800 units Actual 52 22 20 10000 kg at 2 per kg 8000 hours at 4 per hour 11 100 12000 18500