Yellow Ltd, a food manufacturer, is reviewing its operation for March 2021. The company produces only...

   

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Yellow Ltd, a food manufacturer, is reviewing its operation for March 2021. The company produces only one product, called YM. The following standard revenue and cost data per unit of the product is available: Production and sales Selling price Direct material Direct labour 90,000 units £24.00 (4 kg at £2.50 per kg) £10.00 (0.5 hrs at £14.00 per £7.00 hour) Fixed production overheads for March 2021 were expected to be £220,000. Actual data for March 2021 was as follows: Production and sales Direct material Direct labour Fixed production overheads 84,000 units of YM were produced and sold at £24.50 each. 378,000 kg were used at a total cost of £869,400. 50,400 labour hours were worked at a total cost of £655,200. Fixed production overheads were £240,000. There were no inventories at the start or end of March 2021. Required: (a) Calculate the following variances: • Material price and usage variances • Labour rate and efficiency variances (4 Marks) (b) Suggest possible explanations for the variances you have calculated in part (a). In your answer, ensure to discuss about the possible relationships between material and labour variances. Yellow Ltd, a food manufacturer, is reviewing its operation for March 2021. The company produces only one product, called YM. The following standard revenue and cost data per unit of the product is available: Production and sales Selling price Direct material Direct labour 90,000 units £24.00 (4 kg at £2.50 per kg) £10.00 (0.5 hrs at £14.00 per £7.00 hour) Fixed production overheads for March 2021 were expected to be £220,000. Actual data for March 2021 was as follows: Production and sales Direct material Direct labour Fixed production overheads 84,000 units of YM were produced and sold at £24.50 each. 378,000 kg were used at a total cost of £869,400. 50,400 labour hours were worked at a total cost of £655,200. Fixed production overheads were £240,000. There were no inventories at the start or end of March 2021. Required: (a) Calculate the following variances: • Material price and usage variances • Labour rate and efficiency variances (4 Marks) (b) Suggest possible explanations for the variances you have calculated in part (a). In your answer, ensure to discuss about the possible relationships between material and labour variances.

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MATERIAL VARIANCES Data Std Price Std Quantity Actual Price Actual Quantity Purchased Actual Quantit... View the full answer