Zip Ltd, a premium food manufacturer, is reviewing its operations for a three-month period for 2019. The company operates a standard marginal costing system and manufactures one product, ZP, for which the following standard revenue and cost data per unit of product is available:
Selling price GH¢12.00
Direct material A 2.5 kg at GH¢1.70 per kg
Direct material B 1.5 kg at GH¢1.20 per kg
Direct labour 0.45 hours at GH¢6.00 per hour
Fixed production overheads for the three-month period were expected to be GH¢62,500.
Actual data for the three-month period was as follows:
Sales and production 48,000 units of ZP were produced and sold for GH¢580,800
Direct material A 121,951kg were used at a cost of GH¢200,000
Direct material B 67,200 kg were used at a cost of GH¢84,000
Direct labour Employees worked for 18,900 hours, but 19,200 hours were paid at a cost of GH¢117,120
Fixed production overheads GH¢64,000
Budgeted sales for the three-month period were 50,000 units of Product ZP.
Required: (10 marks)
Calculate the following variances.
i) Sales volume contribution and sales price variances
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ii) Price, mix and yield variances for each material
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iii) Labour rate, labour efficiency and idle time variance