Larry Company produces and sells a single product named product L. The budgeted costs per unit of production of product L are as follows: Direct Material 6 kgs at a price of N$6 per kg Direct Labour 6 hrs at a rate of N$8 per hour Overheads The budgeted fixed overheads for the next period are N$150 000 There are no variable production overheads at Larry Company. It is company policy to allocate overheads to production on the basis of direct labour hours. Sales Larry Company have budgeted to produce and sell 10 000 units of product L. Selling price is expected to be N$130 per unit. For December 2019 the following actual results were reported. Sales Revenue Material Labour Overheads N$1 536 000 (12 000 units sold) 90 000 kgs were used at a cost of N$432 000 81 000 hours were worked at a cost of N$631 800 Actual expenditure N$174 000 Larry Company applies absorption costing in reporting their financial performance. Note: Production units are always equal to sales units, therefore there was no closing inventory. Marks 4 Required Prepare a standard cost card for product L, and calculate the profit per unit of 4.1 product L produced. Calculate the following variances 4.2.1 Sales price: 4.2.2 Sales volume; 4.2.3 Material price; 4.2 4.2.4 Material usage; 4.2.5 Labour rate: 4.2.6 Labour efficiency: 4.2.7 Fixed overhead expenditure; 4.2.8 Fixed overhead volume. Explain why a favorable price variance might lead to unfavorable (adverse) 4.3 quantity variance and vice versa. 10 2