Mean Limited manufactures a single product, and the following information relates to the actual selling price and actual cost of the product for the four weeks to 31 March 2012:

£000

Sales (50 000 units) ...........2250

Direct materials (240 000 litres) ...... 528

Direct labour (250 000 hours) .......1375

Variable production overhead ....... 245

Fixed production overhead ........ 650

2798

Loss ................. (548)

The budgeted selling price and standard cost of each unit was as follows:

£

Selling price ..............55

Direct materials (5 litres) .........10

Direct labour (4 hours) ..........20

Variable production overhead ........ 5

Fixed production overhead ..........15

50

Budgeted profit .............. 5

Total budgeted production: 40 000 units.

Required:

(a) Prepare a standard cost operating statement for the four weeks to 31 March 2012 incorporating as many variances as the data permit.

(b) Explain how the statement may help the managers of Mean Limited to control the business more effectively.