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B ANSWER EITHER QUESTION THREE OR QUESTION FOUR FROM THIS SECTION: YOU MUST ANSWER ALL PARTS OF THE QUESTION SELECTED 3. Arizona Instruments produces scientific
B ANSWER EITHER QUESTION THREE OR QUESTION FOUR FROM THIS SECTION: YOU MUST ANSWER ALL PARTS OF THE QUESTION SELECTED 3. Arizona Instruments produces scientific calculators. The budget and actual results for April 2016 are displayed below: Actual Budget results Units sold 10,000 12,000 Revenue 1,850,000 2,160,000 Variable costs 1,120,000 1,188,000 Fixed costs Profit 705,000 25,000 710,000 262,000 REQUIRED: (a) Determine the sales price variance and sales volume variance. Explain to the management of Arizona Instruments in detail the meaning of these two variances and how these can be of use. (8 marks) (b) Identify three possible reasons that can explain either variance in (a) above, and explain how you would go about your investigation. (10 marks) (c) You learn from the operations manager that the standard cost of labour per unit is 74.25 and it should take on average 3 hours to finish a product. Labour costs take up 75% of the total variable cost as budgeted. In reality, it only took 2.5 hours to finish one unit and the cost of labour amounted to 33.60 per hour. Determine the labour efficiency and labour rate variance. Explain to the management of Arizona Instruments in detail the meaning of these two variances and how these can be of use. (12 marks)
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