Sydney Ltd makes a single productLIand the entire product is sold as soon as it is produced. There are no opening or closing stocks and work in progress is negligible. The company operates a standard costing system. Standard costs relating to LI have been calculated as follows.

Tasks

1 Calculate the following variances for the month of December, comment on the possible causes of these variances and recommend corrective action.

(a) Direct labor cost variance, analyzed into rate and efficiency variances

(b) Direct material cost variance, analyzed into price and usage variances

(c) Variable production overhead variance, analyzed into expenditure and efficiency variances

(d) Fixed production overhead variance analyzed into expenditure, capacity and efficiency

(e) Selling price variance

(f) Sales volume variance

2. Prepare an operating statement

3. Report findings to management in accordance with identified responsibility centres.

calculated as follows Standard cost schedule-LI Per unit Direct materials Material X, 15 kg at 5per kg Material Y, 10kg at 10per kg Direct labour, 6 hours at 8 per hour Variable production overhead, 6 hours at 4 per hour 75 100 48 24 Fixed production overhead, 6 hours at 7.5 per hour 45 292 The standard selling price of a LI is 400 and Sydney Ltd produce 2000 units a month During December, 1900 units LI were produced and sold. Relevant details of this production are as follows Direct material Direct material X, 28000 kg costing 126000 were bought and used Direct material Y, 20000 kg costing 220000 were bought and used. Direct labour 11500 hours were worked during the month and total wages were 86250 Variable production overhead The actual cost for the month was 40250 Fixed production overhead The actual cost for the month was 91800 Each LI was sold for 410