Trimtone Limited’ is a company that manufactures the Trimouse. At the start of the year the budgeted costs per unit of the Trimouse were as follows:

The production manager has expressed concern that the total costs seem to be running at too high a level against budgeted costs forecast at the start of the year. You work in the finance department, and the production manager has approached you to see if you can analyse the causes of the problem.

(a) Calculate the budgeted standard cost of one Trimouse.

(b) Prepare a statement analysing the high level of costs that are worrying the production manager using appropriate materials, labour and overhead variances.

(c) Making use of your results in

(b) interpret for management the key features of the firm’s performance.

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Direct costs Direct material: 4.5 kg at 12 per kg Direct labour: Fixed overheads: Skilled: 3 hours at 14 per hour Overheads are budgeted to be 47,250 per annum Overheads are absorbed on a basis of total labour hours Budgeted production: 1,500 units During the period the following costs were actually incurred: Direct materials: Skilled labour: Fixed overheads: Actual production: 7,100 kilograms were used, costing 74,550 in total 4,275 hours worked at a total cost of 70,110 Overheads incurred were 52,025 1,450 units