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Bakerie Ltd. has the following standard costs and is budgeted to produce 2,000 units at a selling price of $20 per unit. Standard Cost per
Bakerie Ltd. has the following standard costs and is budgeted to produce 2,000 units at a selling price of $20 per unit.
Standard Cost per unit | $ | Extra information |
Direct labour | 4 | 2 hours per unit |
Direct materials | 9 | 3 kilograms per unit |
Fixed costs | 3 |
|
Actual production was 3,000 units which generated the following revenue and costs:
| $ |
|
Sales revenue | 45,000 |
|
Direct labour | 9,000 | 3,000 hours |
Direct materials | 32,000 | 8,000 kgs |
Fixed costs | 3,000 |
|
- Calculate the Sales Price and Sales Volume variances.
- Explain how the variances you calculated in 1a) above may have arisen.
- Calculate the Direct Materials Usage and Direct Labour Rate variances and discuss how they may have arisen.
- Discuss two reasons why variances are important to a business.
- Discuss whether all variances should be investigated.
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