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. Quantity per 20kg bag Standard cost Unit price per 20kg bag Sand Cement Solidifier Machine operator 14kg 0.03 per kg 0.42 5kg 0.26 per kg 1.30 1kg 1.00 per kg 1.00 12 minutes 9.00 per hour 1.80 Materials grader and mixer 6 minutes 12.00 per hour 1.20 Fixed overhead 18 minutes 2.50 per hour 0.75 Standard cost per 20kg bag of Fastset 6.47 Budgeted production of Fastset 30,000 x 20kg bags Actual production, inputs and costs for July are given in the table below. Quantity Total cost Actual cost of sand Actual cost of cement 455,700kg 13,671 147,250kg 38,285 Actual cost of solidifier 34,100kg 34,100 Actual cost of machine operators 5,828 hours 52,452 Actual cost of graders and mixers 3,286 hours 39,432 Actual cost of fixed 9,114 hours 25,064 overheads Actual cost of actual production 203,004 Actual production of Fastset 31,000 x 20kg bags 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; (ii) direct materials yield variance; (iii) direct labour mix variance; (iv) direct labour yield variance; (v) fixed overhead expenditure variance; (vi) fixed overhead volume capacity variance; (vii) fixed overhead volume efficiency variance. 3 3 2 2 1 2 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