Question:

The Kaiserburger fast-food operates to the following pre-determined standards:

Raw material 50 kg @2.5 125
Direct labour 14 hrs @ 4.75 66.50

The Actual results are as follows:

Production                                   150 units
Direct material purchased            7,000 kg @ a cost of Rs 18,200
Opening stock direct materials    1,300 kg
Closing stock direct materials      850 kg
Wages paid for 2020 hrs             Rs 9898

Required:

(a) Determine the following variances:
(i) Material price variance
(ii) Material usage variance
(iii) Labour rate variance
(iv) Labour efficiency variance

Briefly describe three causes for each why material price variance and labour rate variance occur.