Goodwood Ltd manufactures and distributes a single product known as “Fin Plates”. The standard cost card of BHP Ltd is shown below.

Goodwood Ltd – Standard Cost Card

Product: Trim-Fin (Currently attainable standards)
Description	Quantities and prices	Unit
		£
Direct materials	2.00 kilos @ £3.00 per kilo	6
Direct labour	0.75 minutes @ £12.00 per hour	9
Fixed overhead	£16.00 per unit	16
	Standard total unit cost:	31
	Standard selling price:	45
	Standard unit gross profit:	14

Other information:

The fixed overhead absorption rate is based on a consistent monthly production and sales of 2,000 units

 

Actual trading results for March 2021 are:

Goodwood Ltd

Actual Trading Results (March 2021)

	£	£
Sales (for 2,200 units produced and sold)		95,000
Direct materials (for 5,300 kilos consumed)	15,000
Direct labour (1,700 hours recorded)	20,000
Fixed overhead	45,000
Cost of sales:		80,000
Gross profit:		15,000

 

Required:

a. Prepare a detailed analysis of the variances from standard that will reconcile expected (standard) and actual profits for March 2021

b. Define the terms ‘planning’ and ‘operational’ variance, and explain the significance of each to management planning and control operations