ANM Ltd manufactures a single product, which requires a single operation and the standard cost for this operation is presented below:

ANM Ltd plan to produce 10 000 units in the month of March, and the budgeted costs based on the information contained in the standard cost card are as follows:

Annual budgeted fixed overheads are $ 1,440,000 and are assumed to be incurred evenly throughout the year. The company uses a variable costing system for internal profit measurment purposes.

Question 1: Calculate the following relevant variances:

1) Total material variances

2) Total labor variances

3) Total overhead variance

4) Total sales variances

Question 2: Explain the reasonable and possible reasons behind the variances in Question 1.

Standard Cost card for the Product: Direct materials: 2kg of component A at S10 per kg lkg of component B at S15 per kg Direct labor (3 hours at$9 per hour) Variable overhead (3 hours at$2 per direct labor hour) Total standard variable cost Standard contribution margin Standard selling price 20 15 27 68 20 80