Sip Ltd. (Sip) is a plastic bottle manufacturer located in Kempton Park. Sip has recently reviewed their operational process...

  

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Sip Ltd. ("Sip") is a plastic bottle manufacturer located in Kempton Park. Sip has recently reviewed their operational process and management accounting data from previous periods. After also considering any future changes which might occur in the macro-environment, Sip has concluded that if the entity's operations were executed in the most efficient manner possible to Sip, the operation process would resemble the following: ● ● ● According to Sip's financial records of September 2022, the entity's performance was the following: 0.7 kg's of plastic would be used in the production of each bottle. The plastic can be purchased for R32 per kilogram in the market. This plastic is considered a raw material in the production of the plastic bottles. Revenue 99 Employees directly involved in the manufacturing of the plastic bottles could manufacture 80 400 bottles monthly. These employees' total working hours per month are 402 hours and a wage will be paid of R270 per hour. Variable overheads will amount to R884 400 during each month. Fixed overhead will amount to R1 129 000 monthly. Each resulting plastic bottle could under most favourable circumstances be sold for R110 per bottle and all 80 400 bottles will be sold. Plastic (71 100kg) Direct wages (402 hours) Variable overheads Fixed overheads ANNEXURE I: FORMATIVE ASSESSMENT 2 ● Additional information: ● Rands 9 006 000 2 133 000 112 158 770 000 1 300 500 HMAC330-1-Jul-Dec2022-V3-ES-29062022 During September 79 000 plastic bottles were manufactured. No opening or closing inventory was on hand for the month of September 2022. Sip employs the absorption costing method and utilises direct labour hours as the allocation basis. Additional information: . During September 79 000 plastic bottles were manufactured. No opening or closing inventory was on hand for the month of September 2022. . • Sip employs the absorption costing method and utilises direct labour hours as the allocation basis. Required: 2.1) Calculate the following variances for September 2022 for Sip Ltd: 2.1.1) Direct material usage variance 2.1.2) Direct material price variance 2.1.3) Direct labour rate variance 2.1.4) Direct labour efficiency variance 2.1.5) Variable overheads spending variance 2.1.6) Variable overheads efficiency variance 2.1.7) Fixed overheads volume capacity variance 2.1.8) Fixed overheads volume efficiency variance 2.1.9) Fixed overheads expenditure variance (2 marks) (2 marks) (2 marks) (2 marks) (2.5 marks) (3 marks) (2.5 marks) (3.5 marks) (1.5 marks) 2.2) Evaluate Sip Ltd.'s September 2022 performance by interpreting the calculated variances and advise Sip Ltd. accordingly. Round to two decimals where applicable. Remember, final products are expressed as integers. (10 marks)

Answer rating: 100% (QA)

ANSWER Calculation of Direct material price Variance Formula for Direct Material Price Variance MPV View the full answer