Advanced: Preparation of an operating control statement and the calculation of labour, material and overhead variances The following statement has been produced for presentation to the general manager of Department X.

The general manager says that this type of statement does not provide much relevant information for him. He also thought that the profit for the month would be well up to budget and was surprised to see a large adverse profit variance.
You are required to

(a) re-draft the above statement in a form which would be more relevant for the general manager; (6 marks)

(b) calculate all sales, material, labour and overhead variances and reconcile to the statement produced in (a); (9 marks)

(c) produce a short report explaining the principles upon which your re-drafted statement is based and what information it provides.

Transcribed Image Text:

Month ended 31 October 1989 Original Actual budget result Variance () () () Sales 600 000 550 000 (50000) Direct materials 150 000 130 000 20000 Direct labour 200 000 189 000 11.000