3b)iv) 'Only significant adverse variances should be investigated.'T&F v) 'If a total materials or labour variance equals zero, it does not need to be investigated as the budgeted figure is the same as the actual figure'.T&F vi) 'An adverse fixed overhead variance can simply be explained as spending too much on overheads, it does not need to be investigated further'.T&F

Kaffee Ltd has the following standard cost. Notes Standard Sales revenue E16 Direct material 15 per kg E5 Direct labour f4 per hour E8 Budgeted fixed costs were $3,000 and sales in units 4,000 units 2,200 units were sold and the actual results for these sales were: Notes Actual Total Sales revenue E57,200 Direct materials 4,400kg E13,200 Direct labour 2,200 hours E17,600 Actual fixed costs were $7,000. 3b) State whether the following statements are true or false. If FALSE explain why. 13 marks i) When doing variance analysis it is only necessary to compare the flexed and actual budgets.' Answer: Explanation: iI) 'A favourable sales price variance can only be caused by the price per unit being greater than the budgeted price per unit.' Answer: Explanation: iii) A favourable material usage variance can only be caused by materials being of better quality than budgeted.' Answer: Explanation