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Standard costing and variance analysis

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Standard costing and variance analysis

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • Author
    Posts
  • May 6, 2021 at 10:46 pm #619903
    Christos265
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    Belta manufacturing company produces a single product, which is known as the Princo. The product undergoes a
    single operation in its manufacture.

    The standard cost for this operation is presented in the following standard
    cost card:

    Standard cost card for the product Princo K’000
    Direct materials:
    2kg of Y at K10000 per kg 20
    1kg of Z at K15000 per kg 15
    Direct labour (3 hours at K9000 per hour) 27
    Variable overhead (3 hours at K2000 per direct labour hour) 6
    Total standard variable cost 68
    Standard contribution margin 20
    Standard selling price 88

    Belta limited plan to produce 10,000 units of Princo in the month of May, and the budgeted costs based on the
    information contained in the standard cost card are as follows:

    Budget based on the above standard costs and an output of 10,000 units
    K’000 K’000 K’000
    Sales (10,000 units at K88,000 per unit)
    Direct materials:
    Y: 20,000kg at K10000 per kg 200,000
    880,000
    Z: 10,000kg at K15000 per kg 150,000 350,000
    Direct labour (30,000 hours at K9000 per hour) 270,000
    Variable overheads (30,000 hours at K2000 per hour) 60,000 680,000
    Budgeted contribution 200,000
    Fixed overheads 120,000
    The Budgeted profit 80,000

    Annual budgeted fixed overheads are K1, 440,000,000 and are assumed to be incurred evenly throughout the
    year. The company uses a variable (marginal) costing system for internal profit measurement purposes.

    The actual results for May are as follows:
    K’000 K’000 K’000
    Sales (9,000 units at K90,000 per unit) Direct
    materials:
    810,000
    Y: 19,000 kg at K11,000 per kg 209,000
    Z: 10,100 kg at K14,000 per kg 141,400 350,400
    Direct labour (28,500 hours at K9,600 per hour) 273,600
    Variable overheads 52,000 676,000
    Contribution 134,000
    Fixed overheads 116,000
    Profit 18,000

    Actual production and sales for the period were 9,000 units.

    Required:

    Calculate sales, variable cost and fixed overhead variances AND prepare an operating statement

    May 7, 2021 at 8:07 am #619937
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51583
    • ☆☆☆☆☆

    There is no point in simply typing out a full question and expecting to be provided with a full answer. You must have an answer in the same book in which you found the question and so ask about whatever it is in the answer that you are not clear about, and then I will explain.

    (If you do not have an answer because you have been given this question as an exercise, then we certainly do not do your homework for you 🙂 )

    Although obviously in Paper MA you can be required to calculate the variances (and they are all explained in my free lectures), you cannot be asked to prepare an operating statement in Paper MA.

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