Question:
The Kaiserburger fast-food operates to the following pre-determined standards:
Raw material 50 kg @2.5 125
Direct labour 14 hrs @ 4.75 66.50
The Actual results are as follows:
Production 150 units
Direct material purchased 7,000 kg @ a cost of Rs 18,200
Opening stock direct materials 1,300 kg
Closing stock direct materials 850 kg
Wages paid for 2020 hrs Rs 9898
Required:
(a) Determine the following variances:
(i) Material price variance
(ii) Material usage variance
(iii) Labour rate variance
(iv) Labour efficiency variance
Briefly describe three causes for each why material price variance and labour rate variance occur.