QUESTION 2

(20 Marks)

2.1	REQUIRED
	Prepare the Income Statement of Rhea Limited for the month ended 31 May 2017 using the marginal costing method.				(11 marks)
	INFORMATION
	The following information was extracted from the accounting records of Rhea Limited for the month ended 31 May 2017:
			Units
	Inventory on 01 May 2017		Nil
	Production		30 000
	Sales		25 000
	Fixed manufacturing costs		R240 000
	Variable manufacturing costs per unit		R40
	Selling price per unit		R100
	Marketing costs:
		Fixed costs	R18 000 per month
		Advertising	R22 000 per month
		Sales commission	R6 per unit sold
	Administration costs:
		Salaries	R50 000 per month
		Other office costs	R4 per unit sold

2.2	REQUIRED
	Use the information provided below to calculate the following variances of Chrysanth Limited for January 2017:
2.2.1	Total material variance		(3 marks)
2.2.2	Total labour variance		(3 marks)
2.2.3	Total variable overheads variance		(3 marks)
	Note: Indicate whether each variance is favourable or unfavourable.
	INFORMATION
	Chrysanth Limited uses the standard costing system. The standards for the product that it manufactures are as follows:
	Material G Labour Variable overheads Fixed overheads Normal production	4 kg @ R9 per kg 10 hours @ R90 per hour R20 per labour hour R40 000 16 000 per month
	Actual information for January 2017:
	Material G used Labour Variable overheads Fixed overheads Production	59 000 kg @ R10 per kg 160 000 hours @ R92 per hour R22 per labour hour R42 000 15 000