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2. Question 2 The Communication Co, a medium-sized company, produces a single product in its one overseas factory. For control purposes, a standard costing system

2. Question 2 The Communication Co, a medium-sized company, produces a single product in its one overseas factory. For control purposes, a standard costing system was recently introduced. The standards set for the month of December were as follows: Production and sales Selling price (per unit) Materials: Material X 16,000 units 140 Material Y Labour Overheads (all fixed) 6 kilos per unit at 12.25 per kilo 3 kilos per unit at 3.20 per kilo 4.5 hours per unit at 8.40 per hour 86,400 per month. (They are not absorbed into the product costs) The actual data for the month of December is as follows: Produced 15,400 units which were sold at 138.25 each Materials: Used 98,560 kilos of material X at a total cost of 1,256,640 and used 42,350 kilos of material Y at a total cost of 132,979. Labour: Paid an actual rate of 8.65 per hour to the labour force. The total amount paid out, amounted to 612,766. Overheads (all fixed): 96,840 Required: (a) Prepare a standard costing profit statement, and a profit statement based on actual figures for the month of December. (10 marks) (b) Prepare a statement of the variances which reconciles the actual with the standard profit or loss figure. (Mix and yield variances are not required.) (20 marks) (d) State TWO possible causes of an adverse labour rate variance. (e) Outline the uses of standard costing, and discuss the reasons why standards must be reviewed (c) Explain briefly the possible reasons for inter-relationships between material variances and labour variances. (5 marks) (5 marks) (10 marks) (Total: 50 marks)

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