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CHICO 150 TL QUESTION FIVE Zealow Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the

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CHICO 150 TL QUESTION FIVE Zealow Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product which the company manufacturers. "The Stand", the system became operational on 1 March 2017 The Management Accountant has consulted with the Senior Engineer and they have agreed the following standard specifications to manufacture one unit of the product known as The Stand". 0410 ten Direct materials 4kg @ GH41.75 per kg Direct labour 2 hours @ GH10 per hour Variable overhead 2 hours a GH48.25 per hour The Marketing Director has advised that in Zealow Lid's industry, the budgeted selling price is normally calculated to achieve a mark up to 30% on cost The budgets level of prodution and ales acuray has been gred with both production !! managers and sales staff at 24,000 units per month The actual results for the month of March 2017 are as follows: Sales 22,000 units yielding a total revenue of GH41,276,000 Production 23.000 units, Direct Materials 90,000 kgs at a cost of GH162,000 Direct labour 48,000 hours at a cost of GH576,000 Variable overhead GH350,000 Required: a) Calculate the standard selling price of one unit of "The Stand" and prepare a summary budgeted profit statement for Zealow Ltd for the month of March 2017 (2 marks) b) Calculate the relevant variances for March 2017 under the headings of sales, materials, labour and overheads. (10 marks) c) Zealow Ltd uses a standard marginal costing system and therefore fixed costs have been ignored in the calculations shown above. Assuming that the fixed costs for the company are estimated to be GH41.879,200 per annum, calculate the monthly sales in both units and value which will be required to break-even and estimate the margin of safety, based on the current budget levels. marks) 0782 m 0710842 0.1% 0.2090084 0840 (Total: 15 marks) Page 5 of 5

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