Flint Palatignium Ltd calculates the prices of its output by adding a mark-up of 15 per cent to standard costs. These standard costs are arrived at by reference to budgeted outputs and estimated direct costs as follows:

Management accounts for April, 20X8 provide an analysis of operations as follows:

Materials in stock are valued at standard cost. At 1 April, 1,000 units of material were held, whereas at 30 April the stock of this material increased to 1,750 units.

Required:

(i) A trading account for the month of April 20X8 comparing the budgeted income and expenditure appropriate to actual output, to actual income and expenditure.

(ii) An explanation of the value of standard costing and variance analysis to a service business whose custom is to negotiate fixed price contracts.

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Materials Direct labour Overheads Mark-up Selling price £ each 5.00 2.50 7.50 15.00 2.25 17.25 Standard price/rate £1 per unit £1.25 per hour £3.75 per direct labour hour