Question 2 Hope Limited makes and sells kiteboards for which the standard cost is as follows: Direct materials 5kg at 17 per kg 85 Direct labour 11 hours at 12 per hour 132 Fixed production overhead 5 hours at 20.00 per hour 100 Standard production cost 317 Standard profit margin 178 Standard selling price 495 Fixed production overhead of 1,500,000 is absorbed into production on the basis of direct labour hours with a budgeted volume for the period of 15,000 units. For the period under consideration, the actual production and sales were 14,000 units with the following results: Direct materials used 77,000 kg 825,000 Direct labour cost incurred 168,000 hours 1,932,000 Fixed production overhead incurred 1,550,000 The actual selling price in the period was 515 per unit. Required: a) Produce a reconciliation statement from the original budgeted profit to the actual profit. The reconciliation should show variances for material price and usage, labour rate and efficiency, fixed overhead expenditure and volume and sales price and sales margin volume clearly indicating whether the variances are favourable or adverse, [16 marks] b) Comment briefly on the possible interdependencies between the variances, use examples from the above to support your argument. [4 marks] [Total 20 marks] ook Air F7 FB F9 F10 Ful SY