Intermediate PQ Limited operates a standard costing system for its only product. The standard cost card is

Question:

Intermediate PQ Limited operates a standard costing system for its only product. The standard cost card is as follows:

Direct material (4kg at £2/kg) £8.00 Direct labour (4 hours at £4/hour) £16.00 Variable overhead (4 hours at £3/hour) £12.00 Fixed overhead (4 hours at £5/hour) £20.00 Fixed overheads are absorbed on the basis of labour hours. Fixed overhead costs are budgeted at £12000 per annum, arising at a constant rate during the year.

Activity in period 3 is budgeted to be 10% of total activity for the year. Actual production during period 3 was 500 units, with actual fixed overhead costs incurred being £9800 and actual hours worked being 1970.

The fixed overhead expenditure variance for period 3 was: image text in transcribed