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QUESTION 11 Bhustan Ltd Manufactures guitars. All guitars are the same size. Each guitar requires the same amount of resources. The following information is from
QUESTION 11 Bhustan Ltd Manufactures guitars. All guitars are the same size. Each guitar requires the same amount of resources. The following information is from the static budget for 2007: Expected production and sales Direct materials Direct manufacturing labour 5,000 units 50,000 kg 20,000 hours Budgeted quantities, budgeted prices, and budgeted unit costs for direct materials and direct manufacturing labour are provided in the table below. Budgeted Quantity Budgeted Price Budgeted Unit Cost Direct materials 10 kg $10 per kg $100 Direct manufacturing labour 4 hours $40 per hour $160 During 2007, the following actual results are provided: Actual production and sales Direct materials (54,000 kg) Direct manufacturing labour (25,000 hours) 6,000 $594,000 $950,000 There were no beginning or ending inventories. Tu wuuyor UTE UUE TUVE TROTTITUUT OTTICITY provided in the table below. Budgeted Quantity Budgeted Price Budgeted Unit Cost Direct materials 10 kg $100 Direct manufacturing labour $10 per kg $40 per hour 4 hours $160 During 2007, the following actual results are provided: Actual production and sales Direct materials (54,000 kg) Direct manufacturing labour (25,000 hours) 6,000 $594,000 $950,000 There were no beginning or ending inventories. 1. Compute the price and efficiency variance for direct materials 2. Compute the price and efficiency variances for direct manufacturing labour 3. Explain THREE possible causes for EACH of the variances you have computed in 1-2 above. [2 marks] [2 marks] [3 Marks)
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