Intermediate: Variance analysis and reconciliation of standard with actual cost SK Limited makes and sells a single product ‘Jay’ for which the standard cost is as follows:

The variable production overhead is deemed to vary with the hours worked.
Overhead is absorbed into production on the basis of standard hours of production and the normal volume of production for the period just ended was 20000 units (100000 standard hours of production).
For the period under consideration, the actual results were:

You are required

(a) to calculate and show, by element of cost, the standard cost for the output for the period;
(2 marks)

(b) to calculate and list the relevant variances in a way which reconciles the standard cost with the actual cost (Note: Fixed production over¬ head sub-variances of capacity and volume efficiency (productivity) are not required).
(9 marks)

(c) to comment briefly on the usefulness to management of statements such as that given in your answer to

(b) above.

Transcribed Image Text:

per unit Direct materials 4 kilograms at 48.00 12.00 per kg Direct labour 5 hours at 35.00 7.00 per hour Variable production 5 hours at 10.00 overhead 2.00 per hour Fixed production 5 hours at 50.00 overhead 10.00 per hour 143.00