Answer Happy

QUESTION 1 (25 marks) Smoothie Ltd. has the following standard costs and is budgeted to produce 2,000 units at a selling price of £20 per unit. Standard Cost per unit £ Extra information Direct labour 4 2 hours per unit Direct materials 9 3 kilograms per unit Fixed costs 3 Actual production was 3,000 units which generated the following revenue and Costs: £ Sales revenue 45,000 Direct labour 9,000 3,000 hours Direct materials 32,000 8,000 kgs Fixed costs 3,000 a) Calculate the Sales Price and Sales Volume variances. (4 marks) b) Explain how the variances you calculated in 1a) above may have arisen. (2 marks) c) Calculate the Direct Materials Usage and Direct Labour Rate variances and discuss how they may have arisen. (8 marks) d) Discuss two reasons why variances are important to a business. (5 marks) e) Discuss whether all variances should be investigated. (6 marks)