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Question 1 Nighy Ltd is a company that manufactures a ready-mixed fence post compound called "Fastset" for sale to large trade suppliers and DIY retailers. Fence post compound sets in around 10 minutes, therefore allowing for concrete fence posts and fence panels to be secured quickly and perpendicularly. Standard costs and budgeted production for each 20kg bag of "Fastset" compound for the July 20X1 period are given in the following table. Fixed overheadsare absorbed on a total labour hour basis. Unit price Quantity per 20kg bag Sand 14kg Cement 5kg Solidifier 1kg Machine operator 12 minutes Materials grader and mixer 6 minutes Fixed overhead 18 minutes Standard cost per 20kg bag of Fastset Budgeted production of Fastset 30,000 x 20kg bags 0.03 per kg 0.26 per kg 1.00 per kg 9.00 per hour 12.00 per hour 2.50 per hour Standard cost per 20kg bag 0.42 1.30 1.00 1.80 1.20 0.75 6.47 Actual production, inputs and costs for July are given in the table below. Quantity Actual cost of sand 455,700kg Actual cost of cement 147,250kg Actual cost of solidifier 34,100kg Actual cost of machine operators 5,828 hours Actual cost of graders and mixers 3,286 hours Actual cost of fixed 9,114 hours overheads Actual cost of actual production Actual production of Fastset 31,000 x 20kg bags Total cost 13,671 38,285 34,100 52,452 39,432 25,064 203,004 There were no materials price or labour rate/expenditure variances during the period, due to medium-term contracts agreed with suppliers and agreements with labour unions. Required (a) Calculate the following variances: (i) direct materials mix variance; 3 (ii) direct materials yield variance; 3 (iii) direct labour mix variance; 2 (iv) direct labour yield variance; 2 (v) fixed overhead expenditure variance; 1 (vi) fixed overhead volume capacity variance; 2 (vii) fixed overhead volume efficiency variance. 2 (b) Discuss the performance of the company's production of Fastset over the period, focusingon the relative uses of the different types of material and grades of labour, the efficiency ofthe production process and the use of the company's production capacity. 12 (c) Briefly discuss why standard costing systems are considered by many to be incompatible with Just-in- time (JIT) manufacturing systems. 3