Ahmed Manufacturing LLC manufactures Product Q. In the previous month of September 2020, the company budgeted to manufacture and sell 3,000 Product Q at a variable cost of OMR47 per unit and total fixed costs of OMR54,000. The budgeted selling price per unit was OMR110. Actual results in that month were 2,800 units manufactured and sold at a selling price per unit of OMR112. The actual total variable costs were OMR229,600 and the actual total fixed costs incurred were OMR55,000. (a) Prepare a budgeted income statement based on the above information by clearly showing (for each item in the income statement) the: (i) Actual Results; (ii) Static Budget amount; (iii) Flexible Budget amount; (iv) Static Budget variances; (v) Flexible Budget variances; (vi) Sales Volume variances;

(10 Marks)

Ahmed Manufacturing LLC manufactures Product Q. The following data are available. . DM [Standard/unit: 10 lb. at OMR4.50/lb.] OMR45 DL [Standard/unit: 0.5 hour at OMR30/hour] OMR15 Budgeted finished units 10,000 Budgeted units actually produced 9,850 Actual DM used 90,855 lb. Actual DL hours used 4,900 Machine Hours (MHs) (Actual) 9,900 Machine Hours (Budgeted) 9,600 Variable Overhead per MH (Actual) 5.00 Variable Overhead per MH (Budgeted) 5.25 Total Actual DL costs OMR153,450 Cost of DM purchased (Qty: 110,000 lb.) OMR465,000 Note: DM: Direct Materials and DL: Direct Labor . (b) (i) Compute the price and efficiency variances for both items of DM and DL. (ii) Compute the Variable Overhead Spending and Efficiency Variance (iii) Unrelated to the question above, compute the Fixed Overhead Spending and Production Volume Variance assuming that the yearly data for the total actual fixed overhead cost is OMR25,000 lower than the budgeted amount of OMR700,000 and budgeted production is 54,000 units higher than the actual production of 504,000.

(15 Marks)

(c) (i) Discuss the possible reasons for an unfavorable direct manufacturing labor efficiency variance. (ii) Explain how Variance analysis could form the basis of continuous operational improvement in Ahmed Manufacturing LLC.

(3 Marks)

(3 Marks)

(iii) Explain why you would disagree that FAVORABLE status of the Variable Overhead Spending Variance is always desirable.