(i) 'Standards are neither good or bad per se, but are what people affected by them believe them to be.' Discuss the nature and purpose of standard costing in the light of this statement,

(ii) The Zee Co. Ltd operated a flexible budgetary system and planned to produce 10,000 units during the year 1984, and prepared the

Unit cost £
Materials 3 lb @ £0.20 per lb 0.60 Labour 6 hrs @ £0.50 per hour 3.00 Fixed overhead 2.00 £5.60 The actual results were:
Units produced 11,000 Material 44,000 @ £0.25 11,000 Labour 55,000 @ £0.70 38,500 Fixed overhead 21,000 £70,500 Required:

(a) Calculate the variances, and prepare a statement reconciling budgeted costs with actual costs.

(b) Comment on the significance of the overhead variances.

Transcribed Image Text:

Unit cost Materials 3 lb @ 0.20 per lb Labour 6 hrs @ 0.50 per hour 0.60 3.00 Fixed overhead 2.00 5.60 The actual results were: Units produced 11,000 Material 44,000 @ 0.25 11,000 Labour 55,000 @ 0.70 38,500 Fixed overhead 21,000 70,500