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10 QUESTION 2 Action Ltd Produces and sells one product with the following standard variable data: Direct Materials (11 liters @ GHS2) 22 Direct labour

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10 QUESTION 2 Action Ltd Produces and sells one product with the following standard variable data: Direct Materials (11 liters @ GHS2) 22 Direct labour (5hrs @ GHS6) 30 Variable Production Overheads Total Standard Cost 62 Standard Contribution 58 Standard Selling Price 120 The variable production overheads is incurred in direct proportion to the direct labour hours worked. The budgeted sales volume for the May was 2,000 units. The following were the actual results recorded during May 2019. Number of units produced and sold is 1,750 units GHS Sales Revenue 218,750 Direct Materials (19,540 liters) 41,034 Direct Labour (8,722 hrs) 47,971 Variable Production Overheads 26,166 Total Variable Cost 115,171 Contribution 103,579 Required: a. Calculate all the operating variances for the month of May 2019 (13 marks) b. Comment on the possible causes of the all the variances computed. (7 marks) (Total 20 marks)

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