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Question 3 F2/FMA Extra MTQs Specimen Exam
Prancer Co uses standard costing to control its costs and revenues. A standard cost card for its only product is given below together with a standard cost operating statement for last month.
Selling price : 150
Direct materials 2 kg @ $25/kg : 50
Direct labour 3 hours @ $10 per hour : 30
Fixed overhead 2 hours at $10 per hour : 20
Profit : 50
Standard cost operating statementBudgeted profit : 600,000
Sales volume variance 60,000 (A)
Standard profit on actual sales 540,000
Sales price variance 20,000 (F)Production cost variances
Material price 7,500 (F)
Material usage 8,000 (A)
Labour rate 2,000 (A)
Labour efficiency : 500 (F)
Fixed overhead expenditure : 7,000 A
Fixed overhead volume : 2,000 (A)Actual profit : 549,000
There is a question:
Production was ….. than budgeted
And The Answer is : (100 UNITS LESS THAN)I haven’t got any clue in this question. Please help me solve this!
Thank you so much and Wish you all the best, Sir!The fixed overhead volume variance is: (actual production – budget production) x std fix o/h per unit.
Standard fix o/h per unit = $20.
Therefore the difference between the actual and budget production = $2,000/$20 = 100 units.
Since the volume variance is adverse, they must have produced 100 units less than budgeted.
Have you watched my free lectures on variances? The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
Hello Mr John,
I have a question regarding the same question.
Actual units sold were 1,200 less than budgeted and actual sales revenue was $ 1,640,000.
How do we come up with 1,640,000?
Thank you in advance.
I think the logic here is that Standard profit on actual sales of 540000 comes up after reducing budgeted sales volume to actual sales volume. therefore, actual sales can be :
Actual volume is 10800 ( 540000 / 50 (std profit)) and actual sales can be calculated :
10800*150(std selling price) = 1,620,000 ( standard sales on actual sales volume ) and add 20000 (F) sales price variance = 1,640,000.
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