Ad vanced : Mix var iances and reconciliat ion of actual and budgeted profit The budgeted income statement for one of the products of Derwen pic for the month of May 1986 was as follows:

During May 1986 production and sales were both above budget and the following income statement was prepared:

In the above statement stock 1s valued at the standard cost of £4 per unit.
There is general satisfaction because the budgeted profit level has been achieved but you have been asked to prepare a standard costing statement analysing the differences between the budget and the actual performance. In your analysis, include calculations of the sales volume and sales price variances and the following cost variances direct matenal pnce, mtx, yield and usage variances:
direct labour rate, mix, productivity and efficiency variances; and overhead spending and volume variances. (17 marks)
Provide a commentary on the variances and give your views on their usefulness.

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Budgeted income statement - May 1986 Sales revenue: 10000 units at 5 () () () 50000 Production costs: Budgeted production 10000 units Direct materials: Material A (5000 kg at 0.30) 1500 B (5000 kg at 0.70) 3500 5000 Direct labour: Skilled (4500 hours at 3.00) 13500 Semi-skilled (2600 hours at 2.50) 6500 20000 Overhead cost: Fixed 10000 Variable (10000 units at 0.50) 5000 40000 Add Opening stock (1000 units at 4) 4000 44 000 Deduct Closing stock (1000 units at 4) Cost of goods sold Budgeted profit 4000 40000 10000