1. Give three reasons for regarding variance reports as a useful tool of management.
2. It was budgeted that to produce 20,000 concrete building blocks in one month would require 100,000 kg of material. In the month of May, only 16,000 blocks were produced, using 80,080 kg of material. The standard cost of materials is £3 per kg. What is the materials usage variance?
3. The standard cost of direct labour in the month of August is £36,000. There is a direct labour rate variance of £6,000 adverse and a direct labour efficiency variance of £2,500 favourable. What is the actual cost of direct labour in the month?
4. Fixed overhead for the month of October has been budgeted at £16,000 with an expectation of 8,000 units of production. The actual fixed overhead cost is £17,500 and the actual production is 7,000 units. What is the variance?