Nu-Line Ltd purchases manufactured machine tools for conversion to specialist use. The converted tools are sold to
Question:
Nu-Line Ltd purchases manufactured machine tools for conversion to specialist use. The converted tools are sold to the textile industry. The following information relates to the month of July Year 3.
There was no stock of purchased machine tools or work in progress at either the start or the end of the month.
Finished goods are valued at full standard cost of production. The standard cost of one completed production unit is:
£
Purchased machine tool ......................... 600
Direct labour ............................................. 300
Fixed production overhead .................... 200
Variable production overhead ................ 100
1,200
The fixed production overhead per unit was determined by reference to the budgeted volume of production per month.
A standard selling price of £2,000 per completed unit was specified in the budget and was achieved in practice.
Actual costs incurred during the month were as follows:
£
Invoiced price of machine tools purchased ............... 86,800
Direct wages paid ........................................................... 47,500
Fixed production overhead .......................................... 35,000
Variable production overhead ..................................... 13,000
Required
(a) Prepare a statement of the budgeted profit and the actual profit for the month of July.
(b) Using variances, reconcile the budgeted profit with the actual profit.
Step by Step Answer:
Financial And Management Accounting An Introduction
ISBN: 9781292244419
8th Edition
Authors: Pauline Weetman