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Question Three [CLO3[12 Marks Bhustan Ltd Manufactures guitars. All guitars are the same size. Each guitar requires the same amount of resources. The following information
Question Three [CLO3[12 Marks Bhustan Ltd Manufactures guitars. All guitars are the same size. Each guitar requires the same amount of resources. The following information is from the static budget for 2007: 5,000 units 50,000 kg 20,000 hours Expected production and sales Direct materials Direct manufacturing labour Budgeted quantities, budgeted prices, and budgeted unit costs for direct materials and direct manufacturing labour are provided in the table below. Budgeted Unit Cost $100 Budgeted Budgeted Price Quantity 10 kg $10 per Kg Direct materials Direct manufacturing labour 4 hours $40 per hour During 2007, the following actual results are provided: $160 6,000 $594,000 $950,000 Actual production and sales Direct materials (54,000 kg) Direct manufacturing labour (25,000 hours) There were no beginning or ending inventories. 1. Compute the price and efficiency variance for direct materials 14 2. Compute the price and efficiency variances for direct manufacturing 3. Explain TWO possible causes for EACH of the variances you have Marks] [4 Marks] labour [4 Marks] computed in 1-2 above. Insert answer to Question 3 here]
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