QUESTION ONE

1.1Distinguish between the following two methods of allocating joint costs:

1.1.1Sales value method

1.1.2Gross margin method

1.2.Analyse the purpose of preparing financial statements.

1.3.Describe the meaning of the term variable cost.

QUESTION TWO

2.1. A standard quantity of 2 kilograms of material BB at a standard price of R4 per kilogram is allowed for the production of one unit of product Triple B. The cost figures for the first quarter of the year showed that 4 400 kg of material BB waspurchased at R4,20 per kg. 2 000 units of product Triple B were produced using 4 200 kg of material BB.You are required to calculate the following variances for material BB:

2.1.1 Purchase price variance

2.1.2 Issue price variance

2.1.3 Quantity variance

2.1.4 Total material variance for the 4 200 kg of material issued.

2.2. To produce one unit of product Triple B a standard quantity of 4 direct labour hours ata standard rate of R6 per hour is allowed. The wage records show that it took 2100 hours at R5,90 per hour to produce 500 units of product Triple B.You are required to calculate the following labour variances:

2.2.1 Labour rate variance

2.2.2 Labour efficiency variance

2.2.3 Total labour variance