In month May 2020 the following data applies for Mwea rice manufactures:

Standard costs for 1 tonne of brown rice

1. 14 tonnes of rice seeds are needed at a cost of Shs.600 per tonne
2. It takes 2 labour hours of work to produce 1 tonne of brown rice and labour is normally paid Shs.180 per hour. Idle time is expected to be 10% of hours paid; this is not reflected in the rate of Shs.180 above.
3. 2 hours of variable overhead at a cost of Shs.300 per hour
4. The standard selling price is Shs.2,400 per tonne
5. The standard contribution per tonne is Shs.560 per tonne

Budget information for the month of May 2020 is:

1. Fixed costs were budgeted at Shs.2,100,000 for the month
2. Budgeted production and sales were 8,400 tonnes

The actual results for the month of May 2020 were as follows:

1. Actual production and sales were 8,000 tonnes
2. 12,000 tonnes of rice seeds were bought and used, costing Shs.6,600,000
3. 15,800 labour hours were paid for, costing Shs.3,033,600
4. 15,000 labour hours were worked
5. Variable production overhead cost Shs.4,800,000
6. Fixed costs were Shs.2,000,000
7. Sales revenue achieved was shs.18,000,000

Required:

1. Prepare Budget profit statement for the month of May 2020 ( 3 Marks)
2. Prepare the actual profit statement for the month of May 2020 ( 3 Marks)
3. Calculate the variances for the month of May 2020 in as much detail as the information allows and reconcile the budget profit to the actual profit using marginal costing principles by preparing the operating statement. (12 marks)