Question 24 Woolshed Ltd manufactures bike racks for transporting bicycles on cars. The standards to produce one bike rack are as follows: Direct material 4 kg (Q; SS per kg = 820 Direct labour 3 hours @ 513 per hour = 539 Variable overhead [based on direct labour hours) I 3 hours @ 56 per hour = 318 During the week ended 31 October= the following activities took place: :- T 400 kg of raw materials were purchased for inventory at a cost of 54.95 per kg 2 i100 bike racks were produced 8 3011] kg of raw materials were used 0 O o 5 BOG direct labour hours were worked at a total cost of STE 30D :- 535 6TB of actual variable overhead costs were incurred. Required (i) Calculate the following variances, showing whether each is a favourable {F} or unfavourable (U) variance: :- Price variance for raw materials purchased Raw materials usage variance Direct labour rate variance Direct labour efficiency variance Variable overhead spending variance Variable overhead efficiency variance 14 marks You may use the following formulae: Price variance (Standard cost per unit Actual cost per unit) X Actual quantity used or purchased (Standard quantity allowed Actual quantity used) X Standard cost per unit (ii) Provide plausible explanations for the variances you calculated in {i} above. Ensure you consider and discuss the impact each variance may have on others. Also discuss the flow on effect of managers' decision making of one cost component on other cost components. and the impact of these decisions on the company's profit and operations. ti marks