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I have a question regarding this reconciliation and variance analysis.
In this example 53000 items sold and 55000 produced. Variance is calculated for materials for 55000. But then when profit is reconciled, in your answer actual profit 1222., whereas actual profit is 1118. 104 is the difference for unsold items. How should this be accounted for in the reconciliation statement?Thanks.
The actual profit is not 1118 – it is 1222.
If you watch the free lecture then you will see why 🙂
Oops sorry – I was thinking of the main lecture on variance analysis.
The actual profit is as follows:
Sales: 5,035,000
Cost of sales:
Materials 2,300,000
Labour 180,000
Variable o/h’s 502,000
2,982,000
Less: cl inv
(2,000 x 52) 104,000 (inventory is always valued at std cost)2.878,000
Contribution 2,157,000
Fixed o/hs 935,000Profit 1,222,000
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