1.

Direct material price and Direct material quantity

a. Direct material price - Unfavourable

i. (Standard – Actual)* Actual quantity
1. Actual = 250,000/10,000 = $25
2. ($20 - $25)* 10,000 = ($50,000)

b. Direct material quantity - Favourable

i. (Standard – Actual)* Standard price
1. 0.55 hrs x 20,000 = 11,000
2. (11,000 – 10,000)* 20 = $20,000

2. Direct labour rate and direct labour efficiency

a. Direct labour rate – unfavourable
i. (Standard – Actual)* Actual hours
1. (2.50 – 2)* 36,000 = $18,000

b. Direct labour efficiency - Favourable

i. (Standard – Actual)* Standard rate
1. 1.5 x 36,000 = 54,000
2. (54,000 – 36,000)* 2.5 = $45,000
3. Reasoning
a. MPV
i. Increase in market price
b. MQV
i. Skilled Works
c. LRV
i. Increase in wages not reflected in standards
d. LEV
i. Use of highly skilled workers
4. The importance of the standard-setting process for accountants of an organisation as they are
able to produces financial statements that are neutral, reliable, relevant, and comparable.