Bella Ltd manufactures product M, which can be produced using various combinations of materials X, Y and Z. The standard material mix per unit of product M and the standard price per kilogram of material has been established and is as follows:

Budgeted production and sales of product M in August 2022 were 45,000 units. Actual production and sales however were 52,000 units. The actual kilograms and cost of materials used were as follows:

(a) Calculate the material price and usage variances in monetary terms () for material X, Y and Z. You should state clearly whether the variance is favourable (F) or adverse (A).

[6 marks]

(b) Calculate the material mix and yield variances in monetary terms () for material X, Y and Z. You should state clearly whether the variance is favourable (F) or adverse (A).

[6 marks]

(c) Based on your results in part (b) above, explain what the materials mix and materials yield variances indicate about production and sales of product M at Bella Ltd for the month of August 2022.

[6 marks]

(d) Using relevant examples to illustrate, critically discuss the benefits and drawbacks for organisations such as Bella Ltd using a system of standard costing for control purposes.

[7 marks]

[Total: 25 marks]