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Ashtree Follies Ltd manufactures an unusual garden ornament that was recently featured on a popular television gardening programme. Since then they have enjoyed a large
Ashtree Follies Ltd manufactures an unusual garden ornament that was recently featured on a popular television gardening programme. Since then they have enjoyed a large increase in orders from garden centres. Ashtree had budgeted to supply the ornament at a price of 30 each but due to market demand felt able to increase the price to 31 at the beginning of the period. Unfortunately their customers have been slow to pay and so the owner is particularly keen to keep costs under control. The following information relates to last month's production: Budget Actual Production and Sales 500 units 620 units Direct labour (hours) 150 hrs 248 hrs Direct labour () 1050 1674 Clay (kg) 1125 kg 1800 kg Clay 5625 8640 Glaze (litres) 25 litres 26 litres Glaze 250 312 Fixed overhead 1250 1450 *Based on budgeted direct labour hours at a rate of 2 per hour. Assume variable costing is used to prepare the statements. Required: (a) Calculate following variances: price and usage variance for clay and glaze labour rate and efficiency variances fixed overhead expenditure variance sales variances (price and volume) (10 marks) (b) From the information available, write a report to the chairman of the company explaining the variances calculated in your answer to (a) (10 marks)
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