Full Stop Ltd manufactures a key component used in electric car braking systems. There are several large competitors in the industry but the growing market has allowed Full Stop to generate sufficient sales to be profitable on an annual basis, although demand can fluctuate significantly from month to month. The nature of the product means that quality is vital. Any drop in quality would almost certainly lead to customers looking for a new supplier, although switching to a new supplier would take several months to arrange. The company has a standard costing system in place and the standard cost card currently in use is shown below: Selling price Direct materials (0.5kg x 12/kg) Direct labour (0.2 hours x 20/hour) Variable overhead (0.2 hours x 8/hour) Fixed overhead Standard profit /unit 25.00 (6.00) (4.00) (1.60) (4.50) 8.90 Budgeted production and sales are 240,000 units per year, split evenly throughout the year, giving a budgeted monthly absorption costing profit of 178,000. The nature of Full Stop's production process means that production and sales volumes are always identical. The actual results for December and the variances for the month that the Budgeted production and sales are 240,000 units per year, split evenly throughout the year, giving a budgeted monthly absorption costing profit of 178,000. The nature of Full Stop's production process means that production and sales volumes are always identical. The actual results for December and the variances for the month that the Management Accountant has calculated so far are shown below: Actual results for December Sales revenue 526,750 Direct materials (11,825 kg) 130,075 Direct labour (3,870 hours) 81,270 Variable overhead 32,895 Fixed overhead 94,250 Selected variances for December Sales volume 13,350 (F) Sales price 10,750 (A) Direct material price 11,825 (F) Direct material usage 12,900 (A) Fixed overhead expenditure 4,250 (A) Fixed overhead volume 6,750 (F) In a meeting to discuss the performance for December, the following comments were made: The sales manager stated "I think the results show that we were able to grow sales through the hard work of our sales people who are explaining the product's superior The sales manager stated "I think the results show that we were able to grow sales through the hard work of our sales people who are explaining the product's superior quality to our customers" The production manager explained that the adverse material usage variance is simply due to the increased sales volume" and "the favourable fixed overhead volume variance shows that we are controlling our fixed costs well" The operations manager concluded "we can say that our overall performance is better than expected given that profit is higher than budgeted" Required a) Calculate the direct labour variances and variable overhead variances for December (10 marks) b) Explain to what extent each of the statements made in the meeting to discuss December's performance is correct. (Maximum 375 words) (15 marks) The production manager is also reviewing the performance of her three maintenance technicians in December. Their role is to provide both preventative maintenance and repairs for the machinery in Full Stop's manufacturing facility. The performance of the technicians has not previously been measured using formal performance measures, but a number measures that could be used have been suggested and these are shown below. Possible performance measures - Technician Technician Technician December results A B Number of machines serviced 30 25 20 The performance of the technicians has not previously been measured using formal performance measures, but a number measures that could be used have been suggested and these are shown below. Possible performance measures - Technician Technician Technician December results A B C Number of machines serviced 30 25 20 Repairs performed 28 25 35 Average response time to repair requests 2 hours 1.5 hours 1 hour 2 hours Average time to complete repair 2.5 hours 2.5 hours 3 hours % successful repairs* 98% 99% 92% *A repair is considered successful if the machine involved does not requires further repair within 48 hours. c) Discuss whether it possible to assess which technician had the best performance in December. Your answer should consider single, multiple, and composite measures. (Maximum 250 words) (10 marks) Full Stop Ltd manufactures a key component used in electric car braking systems. There are several large competitors in the industry but the growing market has allowed Full Stop to generate sufficient sales to be profitable on an annual basis, although demand can fluctuate significantly from month to month. The nature of the product means that quality is vital. Any drop in quality would almost certainly lead to customers looking for a new supplier, although switching to a new supplier would take several months to arrange. The company has a standard costing system in place and the standard cost card currently in use is shown below: Selling price Direct materials (0.5kg x 12/kg) Direct labour (0.2 hours x 20/hour) Variable overhead (0.2 hours x 8/hour) Fixed overhead Standard profit /unit 25.00 (6.00) (4.00) (1.60) (4.50) 8.90 Budgeted production and sales are 240,000 units per year, split evenly throughout the year, giving a budgeted monthly absorption costing profit of 178,000. The nature of Full Stop's production process means that production and sales volumes are always identical. The actual results for December and the variances for the month that the Budgeted production and sales are 240,000 units per year, split evenly throughout the year, giving a budgeted monthly absorption costing profit of 178,000. The nature of Full Stop's production process means that production and sales volumes are always identical. The actual results for December and the variances for the month that the Management Accountant has calculated so far are shown below: Actual results for December Sales revenue 526,750 Direct materials (11,825 kg) 130,075 Direct labour (3,870 hours) 81,270 Variable overhead 32,895 Fixed overhead 94,250 Selected variances for December Sales volume 13,350 (F) Sales price 10,750 (A) Direct material price 11,825 (F) Direct material usage 12,900 (A) Fixed overhead expenditure 4,250 (A) Fixed overhead volume 6,750 (F) In a meeting to discuss the performance for December, the following comments were made: The sales manager stated "I think the results show that we were able to grow sales through the hard work of our sales people who are explaining the product's superior The sales manager stated "I think the results show that we were able to grow sales through the hard work of our sales people who are explaining the product's superior quality to our customers" The production manager explained that the adverse material usage variance is simply due to the increased sales volume" and "the favourable fixed overhead volume variance shows that we are controlling our fixed costs well" The operations manager concluded "we can say that our overall performance is better than expected given that profit is higher than budgeted" Required a) Calculate the direct labour variances and variable overhead variances for December (10 marks) b) Explain to what extent each of the statements made in the meeting to discuss December's performance is correct. (Maximum 375 words) (15 marks) The production manager is also reviewing the performance of her three maintenance technicians in December. Their role is to provide both preventative maintenance and repairs for the machinery in Full Stop's manufacturing facility. The performance of the technicians has not previously been measured using formal performance measures, but a number measures that could be used have been suggested and these are shown below. Possible performance measures - Technician Technician Technician December results A B Number of machines serviced 30 25 20 The performance of the technicians has not previously been measured using formal performance measures, but a number measures that could be used have been suggested and these are shown below. Possible performance measures - Technician Technician Technician December results A B C Number of machines serviced 30 25 20 Repairs performed 28 25 35 Average response time to repair requests 2 hours 1.5 hours 1 hour 2 hours Average time to complete repair 2.5 hours 2.5 hours 3 hours % successful repairs* 98% 99% 92% *A repair is considered successful if the machine involved does not requires further repair within 48 hours. c) Discuss whether it possible to assess which technician had the best performance in December. Your answer should consider single, multiple, and composite measures. (Maximum 250 words) (10 marks)