Question 5: Variance analysis [20 marks] In the month of September Bookmark Books produced 2,000 bookmarks to sell to retail outlets throughout the region. The current retail selling price for the bookmarks is $15.00 per bookmark. The following costs for producing the bookmarks are as follows: Direct materials (standard cost) per bookmark: 0.01 metres of recycled cardboard @2.20 per metre 50.22 10 grams of decorations @ $0.50 per gram $5.00 Standard cost direct materials per bookmark $5.22 Direct labour (standard cost) per bookmark: 0.02 hours cutting cardboard and sealing @20 per hour $0.40 0.15 hours decorating bookmarks @ $40 per hour $6.00 Standard cost direct labour per bookmark $6.40 During the month of the actual costs for direct labour and direct materials were as follows: a. The purchase of 100 metres of recycled cardboard at $2.15 per metre b. The purchase of 250 grams of decorations at $0.55 per gram C. 22 metres of recycled cardboard was used at $2.15 per metre d. 22,500 grams of decorations were used at $0.55 per gram e. Direct labour hours used in the creation of the bookmark using the recycled cardboard was 35 hours at $22 per hour f. Direct labour hours used in the decorating of the bookmark was 315 hours at $36 per hour Required: 1. Calculate the following variances and state whether they are favourable or unfavourable. Ensure that you clearly state the formula that you have used as well as all inputs into the formula. [12 marks] Direct materials price variance for the recycled cardboard Direct materials quantity variance/Volume variance for decorations Direct labour price variance for recycled cardboard Direct labour quantity/Volume/Efficiency variance for decorations activities 2. What do you think some of the reasons could be for the total direct materials price variance and total direct labour efficiency variances? Provide one (1) possible reasons for each of these variances. Total four (4) reasons. [8 marks]