Question

A- A - 15 AaBbcc Aabcc AaB C AaBbcc AaBbcc 1 Normal No Spec. Heading Heading 2 Heading Paragraph Wood-cuttid manufactures office chairs. These chairs contain three materials. The standard usage and cost for one chair is as follows: Material A 1.5kg 52.00 per Material BQSKE $4.00 per Material C 25 $350 per kg $ 3,00 2,00 8.75 1375 The standard sales price for each tablet is $2000 The company has a standard gross profit of 55,00 per unit with the difference of $1,25 being fed production overhead costs in the month of August 2015, Wood-cut Ltd produced and sold 120.000 tablets. Below is a list of the actual results Sales 120.000 $21.50 S 2.580 000.00 Varicos Material A 170 000 at 52,20 per Mat 62.000 5350 Der Man 200053.60 per 374 000.00 217.000,00 10000001690000 The production Cost 191.000,00 O

Require:
Prepare a reconciliation of the actual budgeted profit by calculating all relevant variances.

Answer 1

(All amount in $) Direct Material Price Variance = (Actual Price - Standard Price) * Actual Quantiry For A = (2.20-2)* 1,70,000 34,000 (A) For B = (3.50-4)* 62,000 31,000 (F) For C = (3.60-3.50)* 3,05,000 30,500 (A) Direct Material Price Variance 33,500 (A) Direct Material Use Variance = (Actual Qty - Standard Qty) * Standard Price For A = ((170000)-(120000*1.5))* 2 20000 (F) For B = ((62,000)-(120000*.50))* 4 8000 (A) For C = ((3,05,000)-(120000*2.5))*3.50 17500 (A) Direct Material Use Variance 5,500 (A) Fixed Overhead Cost Variance = Absorbed Fixed Cost - Actual Fixed Cost Fixed Overhead Cost Variance = (1.25*120000) - 191000 41000 (A) Sales Margin Variance - Actual Qty of sales (Actual sale price - Standard Selling Price) Sales Margin Variance = 120000 (21.50 - 20) 180000 (F) Computation of Budgeted Result $ Sales (120000*20) 24,00,000 Less: Variable Cost for Material: A (120000*1.5*2) В (120000*.5*4) с (120000*2.5*3.5) 3,60,000 2,40,000 10,50,000 Fixed Production Cost (120000*1.25) 1,50,000 Gross Profit 6,00,000 Reconciliation of Actual and Budgeted Profit $ Actual Gross Profit 7,00,000 (Add Adverse Variance) Add: Direct Material Price Variance Add: Direct Material Use Variance Add: Fixed Overhead Cost Variance 33,500 5,500 41,000 (Less Favorable Variance) Less: Sales Margin Variance -1,80,000 Budgeted Gross Profit 6,00,000