HGW Limited produces a product called a Lexton. The standard selling price and the manufacturing costs of this product are as follows:

The projected production and sales for March 2004 were 520 units.
On 1 April 2004 the following actual figures were determined.

There was no opening stock of the product Lexton.

Required:

(a) Prepare an actual profit and loss account for HGW Ltd for March 2004.

(b) Calculate the following variances and their respective sub-variances:
(i) sales — price and volume (ii) direct materials — price and usage (iii) direct labour — rate and efficiency.

(c) Prepare a statement reconciling the actual profit calculated in part (a) with the budgeted profit on actual sales. (Use the variances calculated in part (b) and the given  overhead variance.)

(d) Write a report to the management outlining the factors that need to be considered when standards are being established.

Transcribed Image Text:

Standard selling price per unit Standard production costs: Direct material Direct labour Variable overheads 1.5 kilos at 12 per kilo 4.4 hours at 7.50 per hour 4.4 hours at 5 per hour 86 18 33 22 73