Below is the information on the operation of Spice Sdn. Bhd. which manufactures a health product under the brand name SS:

Standard Cost Card RM

Direct material 0.8kg at RM12 per kg 9.60

Direct labour 3 hours at RM6 per hour 18.00

Variable overhead 4 hours at RM2.90 per hour 11.60

39.20

For the month of July 2020, the company has estimated to manufacture and sell 4,875 units of SS at a standard selling price of RM40 per unit. The actual results for that month were as follows:

A total of 5,200 units of SS was sold for RM197,600.

Direct materials of 4,100 kg were bought with the cost of RM51,250. However, only 3,600 kgs were consumed for production.

Direct labor hours of 9,000 hours were used totaling RM55,800.

Based on the above information, you are required to:

1. Provide the formula and calculate each of the following variances. Then, determine whether each of them is Favourable (F) or Unfavourable (U):

1. direct material price variance;

(3)

2. direct material quantity variance;

(3)

3. direct labour rate variance; and

(3)

4. direct labour efficiency variance.

(3)

2. Based on your calculations in (a) above, explain your answers and provide ONE (1) reason each for your answers for (i) and (iii).

(8)

3. Discuss how the information from this variance analysis benefits Spice Sdn. Bhd.