Mowbray Ltd makes and sells one product, the standard costs of which are as follows:

£

Direct materials (3 kg at £2.50/kg) 7.50 Direct labour (15 minutes at £9.00/hr) 2.25 Fixed overheads 3.60 13.35 Selling price 20.00 Standard profit margin 6.65 The monthly production and sales are planned to be 1,200 units.

The actual results for May were as follows:

£

Sales revenue 18,000 Less Direct materials (7,400) (2,800 kg)

Direct labour (2,300) (255 hr)

Fixed overheads (4,100)

Operating profit 4,200 There were no inventories at the start or end of May. As a result of poor sales demand during May, the business reduced the price of all sales by 10 per cent.

Required:

Calculate the budgeted profit for May and reconcile it to the actual profit through variances, going into as much detail as is possible from the information available.

Varne Chemprocessors is a business that specialises in plastics. It uses a standard costing system to monitor and report its purchases and usage of materials. During the most recent month, accounting period six, the purchase and usage of chemical UK194 were as follows:

Purchases/usage 28,100 litres Total price £51,704 13.7 13.6 504 EXERCISES Because of fire risk and the danger to health, no inventories are held by the business. UK194 is used solely in the manufacture of a product called Varnelyne. The standard cost specification shows that, for the production of 5,000 litres of Varnelyne, 200 litres of UK194 is needed at a total standard cost of £392. During period six, 637,500 litres of Varnelyne were produced.

Required:

(a) Calculate the price and usage variances for UK194 for period six.