18.19 Grindleton Gears Limited is a manufacturing business that uses a standard costing system. If a variance

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18.19 Grindleton Gears Limited is a manufacturing business that uses a standard costing system. If a variance exceeds 5% of the flexed budget total for that item, the management team investigates it, whether it is favourable or adverse. The company's flexed budget for February 20X4 is:

£

Sales 123 470 Costs Direct materials (28 250)

Direct labour (29 900)

Variable production overheads (8 640)

Fixed production overheads (19 780)

Profit 36 900 The management team is presented with the following standard cost operating statement for the month:

Original budgeted net profit Sales profit volume variance Flexed budget net profit Other variances Sales price variance Direct materials price variance Direct materials quantity variance Direct labour rate variance Direct labour efficiency variance Variable overhead variance Fixed overhead variance Total Actual profit You are required to:

i) Using the company's own criterion, decide which variances should be examined.

ii) List reasons why the variances you have identified may have arisen.

iii) Calculate the actual figures for sales, direct materials, direct labour, variable overheads, fixed overheads and profit.

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