Study the information given below and answer the following questions:

1.1 Should Retech Limited accept or reject the special order? Substantiate your answer by calculating the differential profit or loss.

1.2 Would Retech Limited make a profit or loss if it sold all the DVD players (4 400 units) at R260 per unit? Show your calculations.

INFORMATION

Retech Limited manufactures DVD players. It expects to make and sell 4 000 DVD players in 10 batches of 400 units per batch during the coming year.

Expected production costs are summarised below:

ADDITIONAL INFORMATION

The selling price per DVD player is R380. Retech Limited received a special order from a new customer for 400 DVD players. If Retech Limited accepts the order, the sales would increase from 4 000 to 4 400 units. The firm has excess capacity to produce the 400 units. The special order customer Is willing to pay only R260 per unit.

REQUIRED

Refer to the information hereafter and answer the following questions:

1 Calculate the standard labour price per hour.

2 Explain how a favourable direct labour rate variance may be interrelated with an unfavourable direct labour efficiency variable.

INFORMATION

Hyman Motors expected to service 250 cars during the month of May. Servicing each car requires 1.5 hours of labour. The company actually used 379.5 hours of labour to service 230 cars. The labour efficiency variance was R1552.50 (unfavourable).