Calculation of variances and accounting entries for an interlocking standard costing system B Ltd manufactures a single product in one of its factories. Information relating to the month just ended is as follows:

(i) Standard cost per hundred units:

(ii) 226000 units of the product were completed and transferred to finished goods stock.
(iii) 34.900 kilos of raw material were purchased in the month at a cost of £245 900.

(iv) Direct wages were £138545 representing 22 900 hours’ work.

(v) Variable production overheads of £113 800 were incurred.

(vi) Fixed production overheads of £196 800 were incurred.

(vii) Stocks at the beginning and end of the month were:

Raw materials, work in progress, and finished goods stocks are maintained at standard cost.
You should assume that no stock discrepancies or losses occurred during the month just ended.
Required:

(a) Prepare the cost ledger accounts relating to the above information in B Ltd’s interlocking accounting system. Marginal costing principles are employed in the cost ledger.
(17 marks)

(b) Explain and contrast the different types of standards that may be set as a benchmark for performance measurement.

Transcribed Image Text:

Raw materials: 15 kilos at 7 per kilo Direct labour: 10 hours at 6 per hour Variable production overhead: 10 hours at 5 per hour () 105 60 50 215