Question
Diogo Ltd makes a standard product, which is budgeted to sell at $17 a unit. It is made from a budgeted 0.5 kilograms of material,
Diogo Ltd makes a standard product, which is budgeted to sell at $17 a unit. It is made from a budgeted 0.5 kilograms of material, budgeted to cost $7 per kilogram, and worked on by an employee paid a budgeted $13 per hour, for a budgeted 15 minutes. Monthly fixed overheads are budgeted at $18,000. The output for March was budgeted at 5,100 units.
The actual results for March were as follows:
| $ |
Sales revenue (5,380 units) | 79,500 |
Materials (2,840 kilograms) | (26,400) |
Labour (1,300 hours) | (20,700) |
Fixed overheads | (19,100) |
Actual operating profit | 13,300 |
No inventories existed at the start or end of March.
Required:
[i] Deduce the budgeted profit for March. [5 marks]
[ii] Reconcile it with the actual profit. [12 marks]
[iii] Analyse negative variances and explain an impact of your findings on Diogos decision making. [8 marks]
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