Variance analysis and reconciliation of actual and budgeted profit
BS Limited manufactures one standard product and operates a system of variance accounting using a fixed budget. As assistant management accountant, you are responsible for preparing the monthly operating statements. Data from the budget, the standard product cost and actual data for the month ended 31 October are given below. Using the data given, you are required to prepare the operating statement for the month ended 31 October to show the budgeted profit; the variances for direct materials, direct wages, overhead and sales, each analyzed into causes: and actual profit.
Budgeted and standard cost data:
Budgeted sales for each unit of product:
|
Direct material: |
X: |
10 kg at £1 per kg |
|
Y: |
5 kg at £5 per kg |
|
|
Direct wages: |
5 hours at £3 per hour |
Fixed production overhead is absorbed at 200% of direct wages Budgeted sales price has been calculated to give a profit of 20% of sales price
Actual data for month ended 31 October:
Production:9500 units sold at a price of 10% higher than that budgeted
Direct material consumed:
|
X: |
96 000 kg at £1.20 per kg |
|
Y: |
48 000 kg at £4.70 per kg |
Direct wages incurred 46 000 hours at £3.20 per hour
Fixed production overhead incurred £290 000
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