QUESTION FOUR

A Ltd operates a system of standard costs.

The following information is available:

Actuals

Materials consumed $(3600$ units at R$52,50$ per unit$)$

Direct wages

Variable expenses

Fixed expenses

$R$

$189000$

$22100$

$62000$

$188000$

Output during the period was $3500$ units of finished product.

For the above period, the standard production capacity was $4800$ units.

The break up of standard costs per unit were:

The standard wages per unit is based on $9600$ hours for the above at a rate of R$3$ per hour. $6$

$400$ hours were actually worked during the period under review and in addition, wages

for $400$ hours was paid compensate for idle time due to a breakdown of a machine.

This increased the overall wage rate to R$3,25$ per hour.

Required:

Please calculate the following variances:

$4\mathrm{.}1$Material price variance

$4\mathrm{.}2$Material usage variance

$4\mathrm{.}3$Labour rate variance

$4\mathrm{.}4$Labour efficiency variance

$4\mathrm{.}5$Variable expenses variance

$4\mathrm{.}6$Fixed overhead expenditure variance

Denote a favourable variance with an $\text{'}($F$)\text{'}$ and un unfavourable variance with a $\text{'}($U$)\text{'}.$

$4\mathrm{.}7$ What possible measures can A Ltd put in place to ensure that its overall wage rate is

reduced to a minimum by machine