XYZ Company produces gadgets. Overhead is applied to products based on direct labor hours. The denominator level of activity is 4,030 hours. The company's standard cost card is below:

Direct materials: 6 pieces per gadget at shs 500 per piece

Direct labor: 1.3 hours per gadget at shs 8,000 per hour

Variable manufacturing overhead: 1.3 hours per gadget at shs 4,000 per hour

Fixed manufacturing overhead: 1.3 hours per gadget at shs 6,000 per hour

During January, the company produced 3,000 gadgets. The fixed overhead expense budget was shs 24,180,000.Actualcosts in January were as follows:

Direct materials: 25,000 pieces purchased at the cost of shs 480 per piece

Direct labor: 4,000 hours were worked at the cost of shs 36,000,000

Variable manufacturing overhead: Actual cost was shs 17,000,000

Fixed manufacturing overhead: Actual cost was shs 25,000,000

Required:

a)Where information permits, compute the following;

iMaterial variances (6 marks)

iiLabor Variances (6 marks)

iiiOverhead cost variances (6 marks)

b)Explain the different types of standards well known to you and with reasons provide an advice to XYZ Ltd on the appropriate standard type (7 marks)