Cleanahull Ltd operates a small boat cleaning service. Boats are cleaned using a special machine that requires a skilled operator and are finished using unskilled labour. Cleanahull has produced a standard cost schedule as all boats go through the same process. Overheads are absorbed using standard labour hours. The materials come in packs; each boat cleaned should use one pack of materials. Cleanahull budgets to clean 288 boats per month. Standard cost for cleaning a boat: Skilled labour: 2 hours at 6 per hour Unskilled labour: 2 hour at 5 per hour Materials: 1 pack at 5 per pack Variable overheads: 4 hours at 2 per hour Fixed overheads: Total standard cost Profit mark-up at 40% cost Price charged 8 88 on Actual results for May 2017: 31,350 Sales: 330 boats cleaned Less costs 4,368 3,480 Skilled labour: 624 hours Unskilled labour: 696 hours Materials:350 packs Variable overheads Fixed overheads Total costs for May Profit for May 1,575 2,904 8,500 20,827 10,523 Required: (a) Prepare an operating statement, reconciling budgeted and actual profit for Cleanahull Ltd for May 2017 showing two variances for sales and each cost category. (b) Prepare a brief report to the owner of Cleanahull Ltd commenting on the performance in May 2017 suggesting possible reasons for any unexpected results. Cleanahull Ltd operates a small boat cleaning service. Boats are cleaned using a special machine that requires a skilled operator and are finished using unskilled labour. Cleanahull has produced a standard cost schedule as all boats go through the same process. Overheads are absorbed using standard labour hours. The materials come in packs; each boat cleaned should use one pack of materials. Cleanahull budgets to clean 288 boats per month. Standard cost for cleaning a boat: Skilled labour: 2 hours at 6 per hour Unskilled labour: 2 hour at 5 per hour Materials: 1 pack at 5 per pack Variable overheads: 4 hours at 2 per hour Fixed overheads: Total standard cost Profit mark-up at 40% cost Price charged 8 88 on Actual results for May 2017: 31,350 Sales: 330 boats cleaned Less costs 4,368 3,480 Skilled labour: 624 hours Unskilled labour: 696 hours Materials:350 packs Variable overheads Fixed overheads Total costs for May Profit for May 1,575 2,904 8,500 20,827 10,523 Required: (a) Prepare an operating statement, reconciling budgeted and actual profit for Cleanahull Ltd for May 2017 showing two variances for sales and each cost category. (b) Prepare a brief report to the owner of Cleanahull Ltd commenting on the performance in May 2017 suggesting possible reasons for any unexpected results
