Healthy Nasi Sdn Bhd (HNSB) processes and sells brown rice. It buys unprocessed rice seeds and then, using a relatively simple process removes the outer husk of the rice to produce the brown rice. This means that there is substantial loss of weight in the process. The market for the purchase of seeds and the sales of brown rice has been, and is expected to be stable. HNSB uses a variance analysis system based on marginal costing approach to monitor its performance.

In the month of January, the following data applies:

Standard costs for 1 ton of brown rice:

1.4 ton of rice seeds are needed at a cost of RM60 per ton.

It takes 2 labour hours of work to produce 1 ton of brown rice and labour is normally paid RM20 per hour.

2 hours of variable overhead at a cost of RM30 per hour

The standard selling price is RM240 per ton

The standard contribution per ton is RM80 per ton

Budget information for the month of January:

Fixed costs were budgeted at RM210,000 for the month

Budgeted production and sales were 8,400 tons

The actual results for the month of January:

Actual production and sales were 8,000 tons.

12,000 tons of rice seeds were bought and used, costing RM660,000

15,000 labours were worked costing RM288,000

Variable production overhead cost was RM480,000

Fixed costs were RM200,000

Sales revenue achieved was RM1,800,000

(a) Calculate the variances for the month of January in as much detail as the information allows. (8 marks)

(b) Reconcile the budgeted profit to the actual profit using marginal costing principles. (6 marks)

(c) Comment on the performance of the business for the month of January. (6 marks)