Question 1

A famous toy product, Zero, is produced by Pirelli Ltd. The following information is extracted from its production budget of April 2021:-

No. of unit produced:	10,000 units
Direct material cost:	5,000 kg@$9 per kg
Direct labour cost:	2,500 hours@$40 per hour

The actual results for the month of April 2021 are as follows:-

No. of unit produced:	8,000 units
Direct material purchased:	4,000 kg costing $38,000
Direct material used:	3,200 kg
Direct labour cost:	2,000 hours costing $84,000

Required:

a) Calculate material price variance, material usage variance and total material variance. (9 marks)

b) Calculate the wage rate variance, labour efficiency variance and total labour variance. (8 marks)

c) Describe the possible causes of material price variance calculated in (a). (4 marks)

d) Describe the possible causes of wage rate variance calculated in (b). (4 marks)

(Total 25 marks)