You are a management accountant in a company called Plasmid that manufactures pencils, you have been given the following results from the variance report for the month. At the beginning of the month, the supplier for raisins used to make pencils increased the price of the material to meet increasing demand external specialists’ engineers were also hired which increased cost. Production was however slower because new employees needed to be accustomed to production processes. The was also higher than anticipated increase in machine breakdown for the month which meant the company had to hire machinery for the month. Finally, the quality of wood used for the pencils this month was poor which meant that more raising within the mix was used.

Raw materials Variances

Variance Rand Value Price R15,660A Usage R15,618A

Fixed production Overhead Variances

Variance Rand Value Expenditure 15,873A

Efficiency 7,984A

Capacity 3735F

Explain what each of the above variances mean, suggest reasons for each if the above variance.