Reference no: EM132771066

Carat plc, a premium food manufacturer, is reviewing operations for a three-month period of 20X3. 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 $12.00

Direct material A 2.5 kg at $1.70 per kg

Direct material B 1.5 kg at $1.20 per kg

Direct labour 0.45 hrs at $6.00 per hour

Fixed production overheads for the three-month period were expected to be $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 $580,800

Direct material A 21,951 kg were used at a cost of $200,000

Direct material B 67,200 kg were used at a cost of $84,000

Direct labour Employees worked for 18,900 hours, but 19,200 hours were paid at a cost of $117,120

Fixed production overheads $64,000

Budgeted sales for the three-month period were 50,000 units of Product ZP.

Requirements:

Problem a: Calculate mix and yield variances and suggest possible explanations for

1. Sales variances

II. Materials variances

III. Labor variances