Question from the Institute of Chartered Accountants in Ireland, Professional Examination 2, Management Accounting and Business, Finance I, Summer 1995. (45 minutes)

(a) (Adaptation of question) A management accountant might refer to the following types of standards. What do you think they refer to?

i. Basic standards.
ii. Ideal standards.
iii. Currently attainable standards.

(b) FERRA Ltd has developed the following standard for one of its products—the ‘LOOM’:

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Materials: Labour: Variable overheads: Standard-1 unit of LOOM 10 kg of Y @ 4.50 per kg 4 hours @ 6 per hour 4 hours @ 4.50 per hour Budgeted fixed overhead for Period 2 is 12,500. The following information is available in respect of Period 2. Actual output was 8,250 units of LOOM. Actual costs were as follows: Materials purchases: Materials usage: Labour: Variable overheads: Fixed overheads: 96,500 kg of Y costing 437,980 86,450 kg of Y Wages-&196,800 for 32,000 hours of direct labour 136,000 $11,750 45 24 18 87