How often Standard costing and variance analysis is asked

Where it was asked

What costs marks here

The questions

1. Oct/Nov 2015, Q4.12 marks · multiple choice

   For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Scuba Steve (Pty) Ltd manufactures various items of scuba diving equipment, including snorkels, and its variable manufacturing overheads vary with direct labour hours worked. For September 2015, the actual direct labour hours worked totalled 3 170, the direct labour rate variance was R19 971 (favourable), the standard direct labour rate per hour was R81,50, the standard direct labour cost per snorkel was R32,60, and 6 340 snorkels were actually produced and sold (compared with a fixed budget of 6 000 snorkels). Based on this information, determine the actual rate per hour paid for direct labour in September 2015.

2. Oct/Nov 2015, Q4.22 marks · multiple choice

   For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Using the same September 2015 data for Scuba Steve (Pty) Ltd's snorkel production (actual direct labour hours worked of 3 170; a favourable direct labour rate variance of R19 971; standard direct labour rate of R81,50 per hour; standard direct labour cost of R32,60 per snorkel; actual snorkels produced and sold of 6 340 against a fixed budget of 6 000), calculate the direct labour efficiency variance for September 2015.

3. Oct/Nov 2015, Q4.32 marks · multiple choice

   For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. For Scuba Steve (Pty) Ltd's snorkel production in September 2015, the standard variable manufacturing overhead rate was R40 per labour hour while the actual variable manufacturing overhead rate was R43 per labour hour, and actual direct labour hours worked totalled 3 170. Calculate the variable manufacturing overhead rate variance for September 2015.

4. Oct/Nov 2015, Q4.42 marks · multiple choice

   For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Considering the direct labour rate variance calculated for Scuba Steve (Pty) Ltd's snorkel production in September 2015, identify which of the following is a plausible explanation for that variance.

5. May/Jun 2015, Q5.32 marks · multiple choice

   Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Bathawk (Pty) Ltd manufactures a product called FlyTech. For April 2015 the following information applies: the standard variable direct material cost per unit is R112 (based on 4kg per unit), while the actual variable direct material cost in total for 6 000kg used was R162 000; standard variable manufacturing overheads per unit are R70 while actual variable manufacturing overheads per unit were R65; actual output produced and sold was 1 200 units against a budgeted output of 1 000 units; the actual selling price per unit was R480 while the standard selling price per unit was R500. Variable manufacturing overheads vary with production. Calculate the total material purchase price variance for April 2015.

6. May/Jun 2015, Q5.42 marks · multiple choice

   Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Using the same Bathawk (Pty) Ltd FlyTech information for April 2015 (standard variable direct material cost per unit R112 based on 4kg per unit; actual variable direct material cost in total for 6 000kg was R162 000; standard variable manufacturing overheads per unit R70; actual variable manufacturing overheads per unit R65; actual output 1 200 units versus budgeted output 1 000 units; actual selling price R480 per unit versus standard selling price R500 per unit; variable manufacturing overheads vary with production), calculate the total material variance for April 2015.

7. May/Jun 2015, Q5.52 marks · multiple choice

   Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Using the same Bathawk (Pty) Ltd FlyTech information for April 2015 (standard variable direct material cost per unit R112 based on 4kg per unit; actual variable direct material cost in total for 6 000kg was R162 000; standard variable manufacturing overheads per unit R70; actual variable manufacturing overheads per unit R65; actual output 1 200 units versus budgeted output 1 000 units; actual selling price R480 per unit versus standard selling price R500 per unit; variable manufacturing overheads vary with production), calculate the total variable manufacturing overhead efficiency variance for April 2015.

8. May/Jun 2015, Q5.62 marks · multiple choice

   Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Using the same Bathawk (Pty) Ltd FlyTech information for April 2015 (standard variable direct material cost per unit R112 based on 4kg per unit; actual variable direct material cost in total for 6 000kg was R162 000; standard variable manufacturing overheads per unit R70; actual variable manufacturing overheads per unit R65; actual output 1 200 units versus budgeted output 1 000 units; actual selling price R480 per unit versus standard selling price R500 per unit; variable manufacturing overheads vary with production), calculate the total selling price variance for April 2015.

9. Oct/Nov 2014, Q5A(a)(i)4 marks

   Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. For Poli Limited, using the budgeted material cost of R160 000 for 20 000 units per month (4 kg per unit at a standard cost of R2 per kg) and the actual results of R200 000 spent on 90 000 kg of material used to produce 24 000 units, calculate the material purchase price variance.

10. Oct/Nov 2014, Q5A(a)(ii)4 marks

    Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. Still using Poli Limited's budgeted figures (20 000 units per month, 4 kg per unit, standard cost R2 per kg) and actual figures (24 000 units produced, 90 000 kg of material used, actual material cost R200 000), calculate the material quantity variance.

11. Oct/Nov 2014, Q5A(a)(iii)2 marks

    Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. Based on the material purchase price variance and material quantity variance already calculated for Poli Limited, determine the total material variance for the month.

12. Oct/Nov 2014, Q5A(b)2 marks

    Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. With reference to Poli Limited's use of a standard costing system, state two ways in which a standard costing system can improve cost control.

13. Oct/Nov 2014, Q5A(c)2 marks

    Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. Give two reasons why organisations, such as Poli Limited, choose to use a standard costing system.

14. Oct/Nov 2014, Q5B(d)(i)3 marks

    Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. For ABC Limited, using the budgeted selling price of R500 per unit and the actual sales of 2 300 units generating R1 104 000 in revenue for February 2014, calculate the selling price variance.

15. Oct/Nov 2014, Q5B(d)(ii)3 marks

    Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. For ABC Limited, using the budgeted variable manufacturing overheads of R75 000 that vary with 1 500 budgeted labour hours, and the actual variable manufacturing overheads of R73 000 incurred over 1 520 actual labour hours worked in February 2014, calculate the variable manufacturing overhead rate variance.

16. Oct/Nov 2013, Q5(a)(i)3 marks

    Prepaid Meters (Pty) Ltd manufactures prepaid electrical devices and supplies them to the City of Tshwane, operating a manufacturing plant in Rosslyn, Tshwane. The company applies standard costing and uses two raw materials in production, material CTA 1 and material CTA 2. You have been appointed as financial director to help the company become the best in terms of revenue and service levels, and your first task is to assist with standard costing matters. The budget for the year ended 31 October 2013 was based on budgeted sales of 9 000 units and specifies: labour hours of 90 000 at a rate of R15 per hour; material CTA 1 usage of 0,95 kg per unit at R19 per kg (R18,05 per unit); and material CTA 2 usage of 0,85 kg per unit at R20 per kg (R17,00 per unit). The actual results for the period were: actual production of 8 000 units; actual labour hours worked of 80 000; actual labour cost of R1 600 000; materials purchased and used comprising 500 kg of CTA 1 costing R12 000 and 400 kg of CTA 2 costing R6 000. Using the budget and actual figures given for Prepaid Meters (Pty) Ltd for the period ended 31 October 2013 (budgeted labour hours 90 000 at R15 per hour; actual labour hours 80 000 costing R1 600 000 in total), calculate the labour rate variance.

17. Oct/Nov 2013, Q5(a)(ii)3 marks

    Prepaid Meters (Pty) Ltd manufactures prepaid electrical devices and supplies them to the City of Tshwane, operating a manufacturing plant in Rosslyn, Tshwane. The company applies standard costing and uses two raw materials in production, material CTA 1 and material CTA 2. You have been appointed as financial director to help the company become the best in terms of revenue and service levels, and your first task is to assist with standard costing matters. The budget for the year ended 31 October 2013 was based on budgeted sales of 9 000 units and specifies: labour hours of 90 000 at a rate of R15 per hour; material CTA 1 usage of 0,95 kg per unit at R19 per kg (R18,05 per unit); and material CTA 2 usage of 0,85 kg per unit at R20 per kg (R17,00 per unit). The actual results for the period were: actual production of 8 000 units; actual labour hours worked of 80 000; actual labour cost of R1 600 000; materials purchased and used comprising 500 kg of CTA 1 costing R12 000 and 400 kg of CTA 2 costing R6 000. Based on the same budgeted standard of 90 000 labour hours at R15 per hour and the actual results of 8 000 units produced using 80 000 actual labour hours, calculate the labour efficiency variance for Prepaid Meters (Pty) Ltd for the period ended 31 October 2013.

18. Oct/Nov 2013, Q5(a)(iii)3 marks

    Prepaid Meters (Pty) Ltd manufactures prepaid electrical devices and supplies them to the City of Tshwane, operating a manufacturing plant in Rosslyn, Tshwane. The company applies standard costing and uses two raw materials in production, material CTA 1 and material CTA 2. You have been appointed as financial director to help the company become the best in terms of revenue and service levels, and your first task is to assist with standard costing matters. The budget for the year ended 31 October 2013 was based on budgeted sales of 9 000 units and specifies: labour hours of 90 000 at a rate of R15 per hour; material CTA 1 usage of 0,95 kg per unit at R19 per kg (R18,05 per unit); and material CTA 2 usage of 0,85 kg per unit at R20 per kg (R17,00 per unit). The actual results for the period were: actual production of 8 000 units; actual labour hours worked of 80 000; actual labour cost of R1 600 000; materials purchased and used comprising 500 kg of CTA 1 costing R12 000 and 400 kg of CTA 2 costing R6 000. Using the labour information provided (standard rate R15 per hour on 90 000 budgeted hours; actual labour cost of R1 600 000 for 80 000 hours worked to produce 8 000 units), calculate the total labour variance for Prepaid Meters (Pty) Ltd for the period ended 31 October 2013.

19. Oct/Nov 2013, Q5(b)4 marks

    Prepaid Meters (Pty) Ltd manufactures prepaid electrical devices and supplies them to the City of Tshwane, operating a manufacturing plant in Rosslyn, Tshwane. The company applies standard costing and uses two raw materials in production, material CTA 1 and material CTA 2. You have been appointed as financial director to help the company become the best in terms of revenue and service levels, and your first task is to assist with standard costing matters. The budget for the year ended 31 October 2013 was based on budgeted sales of 9 000 units and specifies: labour hours of 90 000 at a rate of R15 per hour; material CTA 1 usage of 0,95 kg per unit at R19 per kg (R18,05 per unit); and material CTA 2 usage of 0,85 kg per unit at R20 per kg (R17,00 per unit). The actual results for the period were: actual production of 8 000 units; actual labour hours worked of 80 000; actual labour cost of R1 600 000; materials purchased and used comprising 500 kg of CTA 1 costing R12 000 and 400 kg of CTA 2 costing R6 000. Calculate the material purchase price variance for material CTA 1 and, separately, for material CTA 2, given that the standard price for CTA 1 is R19 per kg and for CTA 2 is R20 per kg, while during the period Prepaid Meters (Pty) Ltd purchased and used 500 kg of CTA 1 for R12 000 and 400 kg of CTA 2 for R6 000.

20. Oct/Nov 2013, Q5(c)(i)1 mark

    Prepaid Meters (Pty) Ltd manufactures prepaid electrical devices and supplies them to the City of Tshwane, operating a manufacturing plant in Rosslyn, Tshwane. The company applies standard costing and uses two raw materials in production, material CTA 1 and material CTA 2. You have been appointed as financial director to help the company become the best in terms of revenue and service levels, and your first task is to assist with standard costing matters. The budget for the year ended 31 October 2013 was based on budgeted sales of 9 000 units and specifies: labour hours of 90 000 at a rate of R15 per hour; material CTA 1 usage of 0,95 kg per unit at R19 per kg (R18,05 per unit); and material CTA 2 usage of 0,85 kg per unit at R20 per kg (R17,00 per unit). The actual results for the period were: actual production of 8 000 units; actual labour hours worked of 80 000; actual labour cost of R1 600 000; materials purchased and used comprising 500 kg of CTA 1 costing R12 000 and 400 kg of CTA 2 costing R6 000. State whether the following statement is true or false: standard costing may assist the financial director of Prepaid Meters (Pty) Ltd in setting budgets and evaluating managerial performance.

21. Oct/Nov 2013, Q5(c)(ii)1 mark

    Prepaid Meters (Pty) Ltd manufactures prepaid electrical devices and supplies them to the City of Tshwane, operating a manufacturing plant in Rosslyn, Tshwane. The company applies standard costing and uses two raw materials in production, material CTA 1 and material CTA 2. You have been appointed as financial director to help the company become the best in terms of revenue and service levels, and your first task is to assist with standard costing matters. The budget for the year ended 31 October 2013 was based on budgeted sales of 9 000 units and specifies: labour hours of 90 000 at a rate of R15 per hour; material CTA 1 usage of 0,95 kg per unit at R19 per kg (R18,05 per unit); and material CTA 2 usage of 0,85 kg per unit at R20 per kg (R17,00 per unit). The actual results for the period were: actual production of 8 000 units; actual labour hours worked of 80 000; actual labour cost of R1 600 000; materials purchased and used comprising 500 kg of CTA 1 costing R12 000 and 400 kg of CTA 2 costing R6 000. State whether the following statement is true or false: among other possible causes, the reason for a material price variance could be a failure to take advantage of quantity discounts on bulk purchases.

22. May/Jun 2013, Q2(a)2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. For Zanral Ltd, using the standard and actual figures given for direct labour (standard: 20 hours at R8 per hour; actual: 25 hours at R12 per hour, for 500 etags manufactured and sold), calculate the labour rate variance.

23. May/Jun 2013, Q2(b)2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. Using the same standard and actual labour information for Zanral Ltd (standard 20 hours at R8 per hour; actual 25 hours at R12 per hour, for 500 etags), calculate the labour efficiency variance.

24. May/Jun 2013, Q2(c)2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. For Zanral Ltd, calculate the variable manufacturing overhead efficiency variance for the overheads that vary with hours worked, given the standard of 20 hours at R4 per hour and the actual labour hours of 25 hours per etag for the 500 etags manufactured and sold.

25. May/Jun 2013, Q2(d)2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. For Zanral Ltd, using the standard cost of direct material steel (15 kg at R16 per kg) and the actual cost data for steel (10 kg at R12 per kg, totalling R60 000 for the 500 etags manufactured and sold), calculate the purchase price variance for direct material steel.

26. May/Jun 2013, Q2(e)2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. Assess whether the following statement about standard costing at Zanral Ltd is true or false: organisations use standard costing because actual performance can be controlled by measuring it against the standard, any variances can then be investigated, and corrective action taken.