Problem

Lisa Ltd is a manufacturing company producing a single product. The standard cost per unit based on a budgeted production of 3, 400 units in March is as follows: In March 3, 280 units were actually produced at the following costs:

a) Calculate the total material expenditure variance, the material price variance and the material usage variance and classify each variance as favourable or adverse.

b) Calculate the total labour expenditure variance, the labour rate variance and the labour efficiency variance and classify each variance as favourable or adverse.

c) Calculate the fixed overhead expenditure variance and classify it as favourable or adverse.

d) Brief discuss whether all variance should be investigated to find their cause.