Note : the Answer should be computerized on word document and pasted in the answ
ID: 2601373 • Letter: N
Question
Note : the Answer should be computerized on word document and pasted in the answer slot
The business carried out some calculations on set up and the following information relating to their main product was produced Sales Revenue Direct labour (1 hour) Direct materials (1kg) Fixed overheads Standard profit 62 (22) (20) (14) The budgeted output for last month was 1,000 units of this product. Actual output was 1,100 units which were sold for £69,900. The actual production costs were Direct labour (1075 hours) Direct materials (1175 kg) Fixed overheads 24,420 23,260 6.400 There were no inventories at the start or the end of the month. You are required to calculate the variances for the month from the available information, and use them to reconcile the budgeted and actual profit figures. You should produce a document that identifies and explains the variances and reconciles the actual and budgeted profit figures. You should identify further information required that would help to further explain variancesExplanation / Answer
Direct matelial quantity variance =(Standard quantity-Actual quantity)Standard price
=(1000-1175)$20
=3500U
Direct material price variance = (Standard price-Actual price Actual) quantity
= ($20-$19.80)1,175
=240F
Direct labour efficiency variance= (Standard hours-Actual hours)Standard rate
=(1,000-1,075)$22
=1,650U
Direct labour rate variance = (Standard rate-Actual rate) Actual hours
=(22-$22.72)1,075
=770U
Fixed overhead expenditure valiance
= (6,000-6,400)
=400U
Sales Quantity variance
=(1100-1000)62
=6200F
Sales Price variance
=(63.55-62)1100
=1700F
Particulars
Amount ($)
Sales
69900
Particulars
Amount ($)
Less=
Direct material price variance
-3500
Direct labour
24420
Direct material quantity variance
240
Direct meterial
23260
Direct labour rate variance
-1650
Fixed overhead
6400
Direct labour efficiency variance
-770
Total
-54080
Fixed overhead expenditure variance
-400
Sales quantity variance
6200
Actual margin
15820
Sales price variance
1700
Budgeted margin
14000
Total variance
1820
Variance
1820
Particulars
Amount ($)
Sales
69900
Particulars
Amount ($)
Less=
Direct material price variance
-3500
Direct labour
24420
Direct material quantity variance
240
Direct meterial
23260
Direct labour rate variance
-1650
Fixed overhead
6400
Direct labour efficiency variance
-770
Total
-54080
Fixed overhead expenditure variance
-400
Sales quantity variance
6200
Actual margin
15820
Sales price variance
1700
Budgeted margin
14000
Total variance
1820
Variance
1820
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