Zaini Ltd uses the standard costing system and manufactures a single product. The standards per
month for this product are as follows:
Material 4 kilograms at R2.50 per kilogram
Labour 4 hours at R100 per hour
Variable overheads R40 per labour hour
Fixed overheads R48 000
Production 24 000 units per month
Actual results for the latest month were as follows:
Material 81 000 kilograms used at R2.50 per kg
Labour 78 000 hours worked at R96 per hour
Variable overheads R44 per labour hour
Fixed overheads R53 000
Production 20 000 units
Required:
4.1 Calculate and state whether the following variances are favourable / unfavourable:
4.1.1 Raw material usage variance. (5)
4.1.2 Fixed overhead spending variance. (5)
4.1.3 Variable overhead efficiency variance. (5)
4.2 Analyse the underlying causes for variances. (5)
4.3 Evaluate the merits of budgeting.