The Ultimate Chef Ltd manufactures food processors. Their standard cost information for one food processor is:

Materials	2kg @	9.00	per kg	18
Direct Labour	1 hours @	16.00	per hour	16
Variable overheads	1.5 hours @	12.00	per hour	18
				52

Budget information for November 2019:

Budgeted selling price per food processor is 85.

Budgeted sales volume was 3,000 units.

Actual information for November 2019:

3,400 units were produced and sold generating 272,000 revenue.

6,100kg of materials were used costing 57,950.

2,900 hours of labour were worked costing 48,575.

51,000 of variable overheads were incurred.

30,000 of fixed overheads were incurred.

Requirement:

1. Calculate the following variances, stating clearly whether the variance is adverse of favourable:

1. Materials price variance
2. Materials usage variance
3. Labour rate variance
4. Labour efficiency variance
5. Sales price variance
6. Sales margin volume variance

(12 marks)

2. Write a short report to management explaining potential reasons for the variances calculated in part (a).

(7 marks)

3. Describe some of the actions management can take to ensure budgetary control is effective.

(6 marks)

Total: 25 marks