Mowbray Ltd makes and sells one product, the standard costs of which are as follows: Direct
Question:
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 (7½ minutes at £18.00/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 Direct materials (7,400) (2,800 kg)
Direct labour (2,300) (127.5 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.AppendixLO1
Step by Step Answer:
Management Accounting For Decision Makers
ISBN: 9781292349459
10th Edition
Authors: Peter Atrill, Eddie McLaney