Sam and Co are trying to understand the reasons for the costs of their materials and labour for Product A diverging from the standard costs per unit, which were set at the beginning of the year.

Set out below is the standard cost per unit (for materials and labour):

Materials

X 2kg @ 8 per kg

Y 5 kg @ 2 per kg

Labour

4 hours @ 15 per hour

In the month under review, production of A was 10,000 units and the following actual data has been collated by the production accountant:

Material X used = 21,500 kgs at a cost of 161,250.

Material Y used = 45,000 kgs at a cost of 99,000.

Labour hours = 42,000 hours at a cost of 609,000.

You are required to:

a). Calculate the standard cost of the months production. (2 marks)

b). Calculate the actual cost of the months production. (2 marks)

c). Calculate the price and usage variances for each of material X and Y. (6 marks)

d). Calculate the labour rate and labour efficiency variances. (4 marks)

e). Describe the possible causes of the materials and labour variances and comment on how this information can assist with the performance appraisal of managers. (6 marks)

Total (20 marks)