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

$4$ kg at a cost of R$40$ per unit

Direct labour

$1$ hour at a cost of R$10$ per hour

Variable overheads

$1$ hour at R$5$ per direct labour hour

Fixed production overheads

R$360000$

Standard selling price

R$200$ per unit

Production and sales

$10000$ units

Actual data

Direct materials

$41500$ kg @ R$11$ per kg

Direct labour

$9500$ hours @ R$12$ per hour

Variable overheads

R$49400$

Fixed production overheads

R$378000$

Selling price

R$210$

Production and sales

$9000$ units

Required:

$3\mathrm{.}1$

Use the information provided above to calculate the following variances and in each case state whether the variance is favourable or unfavourable.

$3\mathrm{.}1\mathrm{.}1$

Materials issue price variance

$(3)$

$3\mathrm{.}1\mathrm{.}2$

Materials quantity variance

$(3)$

$3\mathrm{.}1\mathrm{.}3$

Total labour variance $($without calculating the labour rate and labour efficiency variance$)$

$(3)$

$3\mathrm{.}1\mathrm{.}4$

Variable overheads efficiency variance

$(3)$

$3\mathrm{.}1\mathrm{.}5$

Variable overheads expenditure variance

$(3)$

$3\mathrm{.}1\mathrm{.}6$

Fixed overheads volume variance

$(3)$

$3\mathrm{.}1\mathrm{.}7$

Sales price variance

$(3)$

$3\mathrm{.}2.$

In each of the following cases, provide two possible reasons for a favourable variance:

$3\mathrm{.}2\mathrm{.}1$

Labour efficiency variance

$(2)$

$3\mathrm{.}2\mathrm{.}2$

Sales quantity variance.

$(2)$

QUESTION FOUR $[25]$

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$1500000$

Average annual profit R$450000$

Life span $5$ years

Minimum required