Question 2 18 Mark: Standard Costs and Variance Quality Leather Limited is a manufacturer of leather foot ware for men and women. The company use a standard cost system, the details of which are noted below for the production of their most popular boot for men. Quality Leather Limited Standard cost to a pair of leather boots Standard Quantity Standard Price or Rate Standard Cost Direct Materials (brushed leather) Direct Labour Variable Overheads (based on labour hours) 0.50m2 0.75 hours 0.75 hours $35/m2 $50/hour $12/hour $ $ $ 17.50 37.50 9.00 Total Cost Per unit $ $ 64.00 Additional Information for the period Cost Quant produced or Used Actual Production for the period Labour (actual hours and cost) Raw Materials (quantity purchased 650 m2) Variable Maunfacturing overheads Manufacturing overheads based on labour hours Recommended retail price per pair 1200 pairs 950 hours 580 m2 $ $ $ 45,600 22,500 11,500 $ 300 (You may like to make your calculation on the attached excel file (go to question 2 worksheet) and cut and paste your answer as a picture into the space below the question) Required: Answer the following questions in relation to the above information. a) Calculate the direct materials price and quantity variance. [3 marks] b) Comment on the variances that you have calculated and make suggestions to the company as to how they may address these variances. [2 marks] [2 marks] d) Comment on the variances and make suggestions to the company as to how they may address the issues suggested by these variances e) Calculate the variable manufacturing overhead variances and comment on the results [3 marks] [2 marks] ) Suggest a strategy for addressing the issues that you have identified in your above calculations. [3 marks] 9) Describe the circumstances where standard costs would be appropriate used as a management tool.