QUESTION $3[25]$

You have recently been appointed by eThekwini Plastic products $($Pty$)$ LTD $($eThekwini

Plastics$)$ as a Management Accountant. eThekwini Plastics manufactures a special type of

hard plastic chicken drinkers $($Rock drinkers$)$ which are popular in the Poultry industry. The

company is situated in $100$ Umgeni Road, Durban. Currently, the product is doing very well

in the market and the market share is expected to increase substantially in $2004.$ To control

conversion costs of its product, the production manager has implemented standard costing

as a control measure to improve operational efficiencies.

The production manager provides you with the following information for the first quarter of

the $2024$ financial period.

$1.$ The production department has set a standard of $4$ kilograms of raw plastic material

to manufacture one unit of Rock drinkers.

$2.$ The existing contract price with the plastic supplier is set at R$10$ per kilogram. The

plastic material price is expected to be constant for the full financial year.

$3.$ The cost figures for the first quarter of showed that $5000$ kg of raw plastic material

was purchased at R$15$ per kg$.$

$4.1000$ units of Rock drinkers were produced using $4,500$ kg of raw plastic material.

$5.$ To produce one Rock drinker, a standard quantity of $5$ direct labour hours at a

standard rate of R$15$ per hour is allowed.

$6.$ The wage records show that it took $5,000$ hours at R$20$ per hour to produce $1000$

units of Rock drinkers.

REQUIRED:

The production manager would like in respect of material and labour, to assist him to

calculate the following variances for control purposes:

# Details Marks

$1.$ Purchase price variance $4$

$2.$ Issue price variance $4$

$3.$ Quantity variance $4$

$4.$ Total material variance for the $4500$ kg of raw plastic material issued $4$

In respect of labour, the production manager requested the following labour

variances to be calculated

$5.$ Labour rate variance $4$

$6.$ Labour efficiency variance $3$

$7.$ Total labour variance $2$

Total $25$