QUESTION 1 -

Havana Limited plans to sell 10 000 units during the period 1 October to 31 December 2016.

Additional information is given below:

Inventory levels are as follows:

• All inventory is issued according to the FIFO method
• Three labour hours are needed to manufacture one completed unit. Workers earn N$20 per hour
• The cost of raw material X is N$1.35 per kg. Raw material Y is purchased at N$0.50 per kg
• Two kg of raw material X and Three kg of raw material Y are required for the production of one unit of the finished product
• Manufacturing overhead costs are allocated at a rate of N$6 per direct labour hour
• Finished products are sold at N$150 per unit

REQUIRED: Using the Information Above Prepare The Following Budgets

• Sales Budget
• Production Budget
• Raw Materials Purchases Budget
• Labour Budget
• Closing Inventory Budget (All Closing Inventories)
• Cost of Goods Manufactured and Cost of Goods Sold Budget in total Value for the last quarter

QUESTION 2 - 

Tsumeb Leather Cc manufactures and sells a single product and uses a standard costing system. The standard costs were set as follows for the current accounting period:

N$

40 Kg of Material @ N$2.5                                   60 000

25 hours of Direct Labour @ N$3.8                       107.50

Overheads: 30 Machine Hours at N$2.5                75.00

Standard Cost                                                   242.50

Actual Results:

Material Purchased: 90 000 Kg @ N$2.55 per Kg (all Material Purchased was Issued to production)

Direct Labour Cost: 54 000 Hours @ N$4 per hour

Actual Overheads cost: N$ 20 000

Credit Sales: 1950 units @ N$350.00 per unit

2000 units were produced.

REQUIRED: Calculate The Following:

• Material Price Variance
• Material Quantity Variance
• Labour Rate Variance
• Labour Efficiency Variance
• Give any three reasons that cause labor rate variance obtained in 5.3
• List any three advantages of standard costing