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. Q1: The following profit reconciliation statement summari zes t ance of one of SEWs products for March. Budgeted profit Sales volume variance Standard profit on actual sales Selling price variance 4 250 85DA 3 400 4000А (600) Adverse Favourable Cost variances: 1 000 Direct material price Direct material usage Direct labour rate Direct labour efficiency Variable overhead expenditure Variable overhead efficiency Fixed overhead expenditure Fixed overhead volume Actual profit 150 200 150 600 75 2 500 150 1175 36502475F 1875
datą The budget for the same period Sales volume Sales revenue Production volume Direct materials purchased Direct materials used Direct material cost 2 4 500 Direct labour hours contained the following 1 500 units £20 000 1 500 unit 750kg 750kg 1 125 Direct labour cost 24 500 Variable overhead costS 12 250 Fixed overhead cost 4 500
Additional information: stocks of raw materials and finished goods are valued at standard cost- during the month the actual number of units produced was 1550; the actual sales revenue was £12 000; the direct materials purchased were 1000kg
Required: . (a) Calculate () the actual sales volume: -950 x-00 (ii) the actual quantity of materials used:, (ii) the actual direct material cost, 6xlooo (iv) the actual direct labour hours; 150-( (v) the actual direct labour cost, (vi) the actual variable overhead cost;-600 (vii) the actual fixed overhead cost. 45DD- ー120ニー
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Answer: (i) A fixed overhead volume variance only occurs with an absorption costing system. The question indicates that a volume variance has been reported. Therefore the company must operate an absorption costing system and report the sales volume variance in terms of profit margins, rather than contribution margins. Budgeted profit margin-budgeted profit /budgeted volume -£425011500 units £2.83 Adverse sales volume variance in units = £850,£2.83-300 units Therefore actual sales volume was 300 units below budgeted sales volume Actual sales volume 1500 units 300 units 1200 units (ii) Standard quantity of material used per units of output-budgeted usage / budgeted production -750 kg 1500 units 0.50 kg Standard price -budgeted material cost/budgeted usage £4500/750 kg - £6 Material usage variance (standard quantity actual quantity) standard price £150A [(550 x 0.5 kg) - AQ)] £6 £150 E4650 - 6AQ 6AQ-14,800 Actual quantity used - 800 kg (iii) Material price variance (standard price- actual price) x actual purchases £1,000F = (£6-actual price) x 1 000 kg £1,000F£6 000 1,000AP 1,000AP- £5 000 AP = £5 per kg Actual material cost- 1 000 kg x £S £5 000 Created by Universal Document Converter(iv) Standard hours per unit of output Budgeted hours/Budgeted output = 1 1 25/1 500 -0,75 hours Standard wage rate budgeted

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