b) Discuss four possible causes for each of the following variances: (i) Materials usage (ii) Labour efficiency
Martin Company manufactures and sells a chemical compound for industrial use. The following
information was available at the beginning of 2017:
Standard selling price £1,170.00
Estimated production & sales (units) 2,025
Estimated direct materials (27 Kilograms at £10.00 per Kg.) £270.00
Estimated direct labour (20 hours at £7.00 per hour) £140.00
Estimated variable manufacturing
At the end of 2017, Martin Company established the following actual figures:
Production & sales 1,725 units sold for £1,210.00 per unit
Direct materials 63,000 Kg. at £9.00 per Kg.
Direct wages 45,000 hours at a total cost of £432,000
Variable manufacturing overhead 31,050 hours at a total cost of £ 230,000
Required: (a) Calculate the following variances and indicate whether the variances are adverse
or favourable:
(i) Materials price (ii)
Materials usage (iii) Labour
rate
(iv) Labour efficiency
(v) Variable overhead rate
(vi) Variable overhead efficiency
(b) Discuss four possible causes for each of the following variances:
(i) Materials usage
(ii) Labour efficiency
(c) Explain how you would determine which variance to examine further in relation to a work
performance?
Can someone help me solve point b and c please.thank you
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