Reference no: EM133018707

Question - Tapas ltd mass produces paella selling to mobile catering outlets. The standard selling price, contribution and profit of an 18kg batch of paella is £150, £40 and £30 respectively. Tapas ltd is reviewing the performance for the month and the actual selling price, contribution and profit of an 18kg batch of paella was £140, £35 and £28 respectively. All paella produced was sold, the company uses a variable costing system and experiences standard loss at 10% of input. Standard mix of the three main ingredients to produce a 18 kg batch of paella are:

10 kg of Rice at £2 per kg = £20

4 kg of Fish at £10 per kg = £40

6 kg of Chicken at £5 per kg = £30

£90

Actual output for the month was 108,000 kg of paella and actual inputs were:

61,000 kg of Rice at £2 per kg

14,000 kg of Fish at £12 per kg

35,000 kg of Chicken at £5 per kg

REQUIRED -

i. Calculate Tapas ltd's Ingredients Mix and Ingredients Yield Variances and reconcile with the Ingredients Volume (Usage) variance.

ii. Calculate the Sales Price and Sales Volume variances and the Ingredients Price variance.

iii. Using the calculations in "I " and "ii" above, provide an explanation for the sales and ingredients variances.

iv. Explain two aims and two limitations of standard costing and variance analysis.