Hobart Ltd$.$ manufactures soft drinks. The following data was used in compiling the

budget for last month:

Product Direct material

$($per batch$)$

Direct labour

$($per batch$)$

Selling price $($per

batch$)$

Sales

$($quantity$)$

Lemonade $6$ litres @ $1\mathrm{.}75$ per

litre

$1$ hour @ $10$ per

hour

$305000$ batches

Cola $2\mathrm{.}5$ litres @ $4$ per

litre

$1\mathrm{.}5$ hours @ $10$

per hour

$338000$ batches

Ginger Ale $4$ litres @ $3\mathrm{.}75$ Per

litre

$1\mathrm{.}25$ hours @ $10$

per hour

$407000$ batches

The actual outcome for the month was in accordance with the budgetary assumptions,

with the following exceptions:

$$ The actual wage rate paid was $12$ per hour.

$$ Actual selling prices per batch were $0\mathrm{.}50$ higher than budgeted.

$$ Actual sales quantities were $3,000$ batches of lemonade, $7,400$ batches of cola

and $6,600$ batches of ginger ale.

REQUIRED:

A$.$ Calculate the following variances, and present a reconciliation of the company$$s

total budgeted and actual contribution for last month:

I. Direct labour rate variance.

II$.$ Sales mix variance.

III. Sales quantity variance.

IV$.$ Sales volume variance.

V$.$ Sales price variance.

$(15$ marks$)$

Page $2$ of $9$

B$.$ Explain the significance of the sales mix, sales quantity and sales volume

variances.

$(5$ marks$)$

C$.$ Explain what is meant by market share and market size variances, and explain

the potential usefulness to the management of Hobart Ltd$.$ of calculating these

two variances. $($Calculations are not required in answering this part$).$

$(5$ marks$)$