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Auto Ltd uses the standard costing system and manufactures a single product. The standards per...

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Accounting

Auto Ltd uses the standard costing system and manufactures a single product. The standards per month for this product are as follows: Material 4 kilograms at R2.50 per kilogram Labour 4 hours at R100 per hour Variable overheads R40 per labour hour Fixed overheads R48 000 Production 24 000 units per month

Actual results for the latest month were as follows: Material 81 000 kilograms used at R2.50 per kg Labour 78 000 hours worked at R96 per hour Variable overheads R44 per labour hour Fixed overheads R53 000 Production 20 000 units Required: 4.1 Calculate and state whether each of the following variances are favourable or unfavourable: 4.1.1 Raw material usage variance. (5) 4.1.2 Fixed overhead spending variance. (5) 4.1.3 Variable overhead efficiency variance. (5) 4.2 Analyse the underlying causes of variances. (5) 4.3 Evaluate the merits of budgeting. (5)

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