Reference no: EM132665155

A manufacturing company had the following STANDARD PRIME COSTS and STANDARD PRIME QUANTITIES budgeted to produce one unit of their main product:

Direct Materials: 25kgs at $15.00 per kg

Direct Labour: 0.5 hour at $40 per labour hour

Quantity produced: 1,500 Units of the product.

ACTUAL COSTS AND QUANTITIES FOR THE PERIOD:

Direct material purchased: 50,000 kgs at a TOTAL cost of $725,000

Direct material used: 38,250 kgs used in production

Direct labour: 735 hours at a TOTAL cost of $30,870

Problem a) Use the standard cost variance formulas to compute the four PRIME COST STANDARD COST VARIANCES. Show all formulas, your workings and indicate whether each variance is favourable or unfavourable.

Problem b) In the space provided below, describe TWO LIMITATIONS and TWO ADVANTAGES of the Standard Costing System in a modern manufacturing environment.