Company XYZ uses a standard costing to evaluate operational performance against budget.

The following budget and actual information is presented to you as the accountant:

Budget

Production and sales: 50 000 units

Material usage per unit: 7kg

Price per kg: R10

Labour minutes per unit: 15 min

Total direct labour cost: R2 000 000

Variable costs: R1 500 000

Actual

Production and sales: 47 500 units

Material used: 356 250kg

Cost of material: R3 241 875

Labour minutes: 703 000 min

Total direct labour cost: R1 900 000

Variable costs: R1 400 000

REQUIRED:

Identify and apply an appropriate variance analysis to evaluate direct material, direct labour and variable overheads (where applicable, express answers to one decimal place). Please provide possible reasons for the discrepancies.