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Piky Enterprises makes and sells a single product. The company operates a standard costing system. Details of the budgeted and actual data are as follows:
Piky Enterprises makes and sells a single product. The company operates a standard costing system. Details of the budgeted and actual data are as follows:
Budgeted data
Standard production costs per unit:
Direct materials
kg at a cost of R per unit
Direct labour
hour at a cost of R per hour
Variable overheads
hour at R per direct labour hour
Fixed production overheads
R
Standard selling price
R per unit
Production and sales
units
Actual data
Direct materials
kg @ R per kg
Direct labour
hours @ R per hour
Variable overheads
R
Fixed production overheads
R
Selling price
R
Production and sales
units
Required:
Use the information provided above to calculate the following variances and in each case state whether the variance is favourable or unfavourable.
Materials issue price variance
Materials quantity variance
Total labour variance without calculating the labour rate and labour efficiency variance
Variable overheads efficiency variance
Variable overheads expenditure variance
Fixed overheads volume variance
Sales price variance
In each of the following cases, provide two possible reasons for a favourable variance:
Labour efficiency variance
Sales quantity variance.
QUESTION FOUR
Whema Ltd is interested in expanding its operations into Durban, South Africa and are looking to invest in offices there. The following information has been extracted from the reports relating to the project:
Investment R
Average annual profit R
Life span years
Minimum required
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