. Advanced: Sales mix and quantity variances. BRK Co operates an absorption costing system and sells three products, B, R, and K which are substitutes for each other. The following standard selling price and cost data relating to these three products:

 The budgeted fixed production overhead for the last period was £81 000. This was absorbed on a machine-hour basis. The standard machine hours for each product and the budgeted levels of production and sales for each product for the last period are as follows:

 Actual volumes and selling prices for the three products in the last period were as follows:

 

Required:

a Calculate the following variances for overall sales for the last period:

(i) sales price variance;

(ii) sales volume profit variance;

(iii) sales mix profit variance;

(iv) sales quantity profit variance and reconcile budgeted profit for the period to actual sales Jess standard cost.

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b Discuss the significance of the sales mix profit variance and comment on whether useful information would be obtained by calculating mix variances for each of these three products.

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c Describe the essential elements of a standard costing system and explain how quantitative analysis can assist in the preparation of standard costs.

Product Selling price por unit 14.00 15.00 18.00 BRY Direct material per unit 300 kg at 1,80 per kg 1.25 kg at 3 28 perg 1.04 kg at 2.50 per kg Direct labour per unt 0.5 hrs at 10.50 pe 0.8 hrs at 8.50 per hou 0.7 hrs at 08.50 per o