Gem Box produces wooden boxes. You are the Finance Manager of the company, and was provided with the table below which shows the budget and actual units sold together with standard costs and actual costs for materials and labour used in the manufacture of wooden boxes:

Data for July 2020:

Assume that the quantity of materials purchased and the quantity used are identical.

Required:

1. Compare the original budget with actual costs for materials and labour and comment on the variances. What is the short coming of this report?

(10 marks)

2. Produce a flexible budget versus actual variance report and calculate the variances on that basis. Comment on the results.

(9 marks)

3. Calculate both usage and price variances for each of materials and labour.

(12 marks)

4. Write a memo to advise the General Manager regarding the likely causes of the material and labour variances above, who should be answerable to the variances, and the appropriate steps to take

Budget- 4,000 2.52 Actual 3,8004 2.62 13.00 Description Units of finished wooden boxes solde Standard material required (kg per wooden box) Actual materials used (kg per wooden box) Standard material costs per kg (RM) Actual material cost per kg (RM) Standard labour hours required (hours per wooden box) Actual labour hours used (hours per wooden box) Standard labour costs per hour (RM) Actual labour cost per hour (RM) 12.80 2.2 N 2.32 10.00 10.50