Energizer Cements Private Ltd. produces and sells one product only, E7 cement, the standard cost for one unit being as follows.

Direct material - 10 kilograms at 20 per kg	200
Direct wages - 5 hours at 6 per hour	30
Variable production overhead - 5 hours at 1 per hour	5
Fixed production overhead - 5 hours at 10 per hour	50
Total standard cost	285
The fixed production overhead included in the standard cost is based on an expected monthly output of 900 units.
During October 2021 the actual results were as follows.
Production	800 units
Direct material	7,800 kg used, costing 159,900
Direct wages	3,800 hours worked for 24,150
Variable production overhead	4,900
Fixed production overhead	47,000

Required:

1. Flex the original budget and show the variances between the flexible budget and actual results (6 marks)

1. Calculate the following variances:

• Direct material price and usage variances
• Direct labour rate and efficiency variances

(14 marks)

1. Discuss the reasons for the adverse/unfavourable variances and provide recommendations to improve (15 marks)
2. Discuss the behavioural implications of allowing staff to participate in the budget setting process (15 marks)

(Total: 50 marks)