A (Note: this question covers material from both Chapters 43 and 44.) 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 19X4 were 520 units.
On 1 April 19X4 the following actual figures were determined.
Sales Production Direct material \(\quad 785\) kilos at \(£12.40

\) per kilo Direct labour \(\quad 2,400\) hours at \(£ 7.80\) per hour Overheads \(\quad £ 12,500\) (overall variance \(£ 400\) adverse)

There was no opening stock of the product Lexton.

\section*{Required:}

(a) Prepare an actual profit and loss statement for HGW Ltd for March 19X4

(b) Calculate the following variances and their respective sub-variances:

(i) sales - price and volume

(ii) direct material - 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