QUESTION ONE (COMPULSORY QUESTION) Kabulukutu plc manufactures wooden toys. It uses a standard costing system to controle costs. The cutting department cuts the shapes which are sold as toy animals. The process is expensive hardwood used The standard cost card for a set of toy animals is given below. Hardwood Direct labour Fixed overhead 0.1 cubic metres at K160 per cubic metre 30 minutes at K9 per hour 30 minutes at K4 per direct labour hour K 16.00 4.50 2.00 22.50 Total cost Fixed overhead absorption rates are based upon budgeted monthly fixed overheads of 26,000 and a budgeted monthly output of 13,000 sets of animals. All stocks are recorded at standard cost. In the most recent month 14,000 sets of animals were made using 1,600 cubic metres of hardwood. Purchases for the period were 1,800 cubic metres of hardwood at K150 per cubic metre. 8,000 direct labour hours were worked and paid at K9:25 per hour. Actual fixed overheads were K23,000 for the month. Required: (a) Calculate the following variances from standard cost for the most recent month: (i) Raw material price (2 Marks) (ii) Raw material usage (2 Marks) (iii) Labour rate (2 Marks) (iv) Labour efficiency (2 Marks) (v) Fixed overhead expenditure (2 Marks) (vi) Fixed overhead volume (2 Marks) (vii) Fixed overhead capacity (2 Marks) (viii)Fixed overhead efficiency (2 Marks) (b) Explain the meaning and possible causes of the raw material and labour variances you have calculated in part (a). (4 Marks) (c) Explain with reasons, the official within an organization who will be responsible for material price variance, Material usage variance, labour rate variance and labour efficiency variance (5 Marks) (Total 25 Marks)