Intermediate: Calculation of labour, material and overhead variances and reconciliation of budgeted and actual profit You are the management accountant of T pic. The following computer printout shows details relating to April:

T pic uses a standard absorption costing system.
There was no opening or closing work-in- progress.
Requirements:

(a) Prepare a statement which reconciles the budgeted profit with the actual profit for April, showing individual variances in as much detail as the above data permit (20 marks)

(b) Explain briefly the possible causes of (i) the material usage variance;
(ii) the labour rate variance; and

(iii)the sales volume profit variance.
(6 marks)

(c) Explain the meaning and relevance of inter¬ dependence of variances when reporting to managers.

Transcribed Image Text:

Actual Budget Sales volume 4900 units 5000 units Selling price per unit 11.00 10.00 Production volume 5400 units 5000 units Direct materials kgs 10 600 10000 price per kg 0.60 0.50 Direct labour hours per unit 0.55 0.50 rate per hour 3.80 4.00 Fixed overhead: Production 10300 10 000 Administration 3 100 3000