Question-1 Mermus is comparing budget and actual data for the last three months. Budget Actual $ $ $ $ 950,000 922,500 Sales Cost of sales Raw materials 133,000 130,500 Direct labour 152,000 153,000 Variable production overheads 100,700 96,300 Fixed production overheads 125,400 115,300 511,100 495,100 438,900 427,400 The budget was prepared on the basis of 95,000 units three-month period were 90,000 units. 0 units produced and sold, but actual production and sales for the Traini WBM Mermus uses standard costing and absorbs fixed production overheads on a machine hour basis. A total of 28,500 standard machine hous were budgeted. A total of 27,200 machine hours were actually used in the three- month period. Required (a) Prepare a revised budget at the new level of activity using a flexible budgeting approach and briefly explain why such a revised budget should be prepared. (b) Calculate the following. (i) Raw material total cost variance; (ii) Direct labour total cost variance: (iii) Fixed overhead efficiency variance; (iv) Fixed overhead capacity variance: (v) Fixed overhead expenditure variance; (c) Suggest possible explanations for the following variances. (1) Raw materials total cost variance; (ii) Fixed overhead efficiency variance; (ii) Fixed overhead expenditure variance; (6 marks) (8 marks) (6 marks) (Total = 20 marks) 1