Lusambo Ltd produces and sells chemical XYZ. The standard cost per unit of XYZ as follows;

Direct material 7.5 Ltr @ K4.5 per litre

Director labour 2.5 hours @ K6 per hour

Variable overheads 2.4 hours @ K1.5 per house

The monthly budgeted fixed overhead were K1,500 for 2,000 budgeted production hours. Lusambo Ltd is expected to produce and sell 10,000 units.

The actual results for the month were as follows:

• Production and sales volume 9,200 units
• Material 72,000 Litres costing K270,000
• Labour hours 27,500 hours costing K137,550
• Variable overheads K45,000
• Fixed overheads K25,300

Required;

1. Calculate the following variances:

1. Variable overhead expenditure
2. Variable overhead efficiency
3. Fixed overhead expenditure
4. Fixed overhead volume

b. Pick any four (4) variances above and explain the causes (8 marks)

c) Explain four (4) types of standards that can be used in organizations. (5 marks)