Jamlee Investment Ltd is planning to make 120,000 units per period of a new product. The following standards have been set:

Per Unit

Direct Material A 1.2 kgs at K11 per kg

Direct Material B 4.7 kg at K6 per Kg

Direct Labor:

Operation 1 42 minutes

Operation 2 37 minutes

Operation 3 11 minutes

Overheads are absorbed at the rate of k30 per labor hour. All direct operatives are paid at the rate of K8 per hour.

Actual results for the period were:

Production 126,000 units

Direct Labor cost k1.7m for 215,000 clock hours

Material A Cost K1.65m for 150,000 kgs

Material B cost K3.6m for 590,000 kgs

Required

1. Calculate the standard cost for one unit

2. Calculate the labor rate variance and labor efficiency variances.

3. Calculate the material price and usage variances.

4. Explain the terms attainable standard and ideal standard and discuss which is most appropriate when setting operational performance standards.

5. List two reasons why an idle time variance might occur.