Connect Ltd manufactures only one product, a portable power bank for charging smart phones. The company uses a standard cost system and has established the following standards per unit. Direct Materials Direct Labour Standard Quantity 2.0kgs 1.4 hours Standard Price 8.50 per kg 11.50 per hour Standard Cost 17.00 16.10 . During May, the following activity was recorded by the company: The company produced 65,000 units during the month. A total of 140,000kg of material were used, purchased at the cost of 1,187,200. The company employs 620 people to work on the portable power bank. During May, each works an average of 160 hours, at an average rate of 11.00 per hour. . Question 7 continues overleaf Page 3 of 7 BMAN21040 REPRINT Question 7 continued Required Compute the following variances for May: a) The materials price and quantity variances. (10 marks) b) The labour rate and efficiency variances. (10 marks) c) In the past, the 620 persons employed in the production of the portable power bank consisted of 100 experienced workers and 520 inexperienced assistants. During May, the company experimented with 70 experienced workers and 550 inexperienced assistants. Would you recommend Connect Ltd continue with the new labour mix? (4 marks) d) The direct materials were purchased from a new supplier who is eager to enter into a long-term purchase contract. Would you recommend that Connect Ltd signs the contract? In your answer, you should identify any potential causes of material quantity variances