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Could you provide me with the solution to these questions please how we get the figures?
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.
Standard cost card
$ per unit
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 statement
$ $
Budgeted profit 600,000
Sales volume variance 60,000 adv
Standard profit on actual sales 540,000
Sales price variance 20,000 fav
560,000
Production cost variances
Adverse Favourable
$ $
Material price 7,500
Material usage 8,000
Labour rate 2,000
Labour efficiency 500
Fixed overhead expenditure 7,000
Fixed overhead volume 2,000
19,000 8,000 11,000 adv
Actual profit 549,000Select the appropriate words, phrases or numbers to correctly complete the commentary on the last month’s results.
Prancer Co uses sandard costing. In the last month actual selling price was standard.
Actual units sold were budgeted and actual sales revenue was $
Production was than budgeted.
Materials caused the biggest cost variances, where a decision to pay standard price resulted in the company using budget.I am sorry, but I cannot type out a complete answer here.
Presumably the book in which you found this question also contains an answer, so please say which part is causing you a problem and I will try and help.
Sorry the bit i am confused with is the actual sold ( i know the answer is 1,200 less) and actual sales revenue (i know the answer is 1,640,000)
Since the sales volume variance is 60,000 adverse and the standard profit is $50 per unit, the actual number sold must be less than budget by 60,000 / 50 = 1,200.
Since the budget profit is $600,000, the budget sales must have been 600,000 / 50 = 12,000. So the actual sales were 12,000 – 1,200 = 10,800 units.
The standard revenue is 10,800 x $150 = 1,620,000.
The sales price variance is 20,000 favourable, so the actual revenue must be 1,620,000 + 20,000 = 1,640,000Last question : the same figure as before but can you advise how the answer in brackets come about:
Production was than budgeted (100 Units less)Materials caused the biggest cost variances, where a decision to pay less than standard price resulted in the company using (320Kg less than )budget.
The fixed overhead volume variance is 2,000. The standard fixed overhead per unit is $20.
So the production must be lower than budget by 2,000/20 = 100 units.The materials usage variance is 8,000, so the actual usage is 8000/25 = 320 kg less than standard usage for the actual production
sir 8000/25=320 kg.how do we knw it is more than the flexed? is it bcoz 8000 is adverse?
also will they ask us to find the actual units produced from the above figure?is it possible ?
Yes – because it as adverse.
On the information given it is not possible to calculate the actual production
good morning sir. concerning the question above (prance company) are there any formulas I can use to find answers in calculating reversed variances, or I must only use concepts and common sense, please help.
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