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(25) QUESTION 2 REQUIRED Use the information given below to calculate the following variances and in each case provide a possible reason for the variance:
(25) QUESTION 2 REQUIRED Use the information given below to calculate the following variances and in each case provide a possible reason for the variance: Material quantity variance (4) 2.1 Direct labour rate variance (4) 2.2 Direct labour efficiency variance (4) 2.3 2.4 Variable overheads expenditure variance Variable overheads efficiency variance (4) (4) 2.5 Fixed overheads volume variance. (5) 2,6 Note: Each answer must indicate whether the variance is favourable (F) or unfavourable (U) INFORMATION Olala Ltd uses the standard costing system. The company budgeted the following figures for December 2018 for 40 000 units: Direct material 80 000 metres at R6 per metre R480 000 40 000 hours at R10.20 per hour Direct labour R408 000 Variable manufacturing overheads R2 per labour hour R80 000 Fixed manufacturing overheads R320 000 During December 2018 the company started and completed 42 000 units and the following transactions were recorded: Purchases of material: 120 000 metres at R6.40 per metre Material issues: 90 000 metres Direct wages paid: 46 000 hours at R9.80 per hour Manufacturing overheads incurred Variable R96 600 Fixed: R324 000
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