IM17.8)Advanced: Variance calculations and reconciliation of budgeted and actual profit. Bamfram plc is a well-established manufacturer of a specialized product, a Wallop, which has the following specifications for production: The standard direct labour hours to produce a Wallop at the standard wage rate of 10.50 per hour has been established at 60 hours per Wallop. SR The annual fixed overhead budget is divided into calendar months with equal production per month. The budgeted annual fixed overheads are 504,000 for the budgeted output of 2,400 Wallops per annum. 642000@ Mr Jones, a marketing person, is now the managing director of Bamfram plc and must report to the board of directors later this day and he seeks your advice in respect of the following operating information for the month of May: The sales manager informs Mr Jones that despite adverse trading conditions his sales staff have been able to sell 180 Wallops at the expected standard selling price. $2800 The production manager along with the purchasing department manager are also pleased that prices for components have been stable for the whole of the current year and they are able to provide the following information: Stocks for May are as follows: The actual number of direct labour hours worked in May was 11,700 , considerably less than the production manager had budgeted. Further, the purchasing manager advised that WALS had cost 171,000 at a price of 57 pper unit in the month of Mr Jones, eager to please the board of directors, requests you, as the newly appointed management accountant, to prepare appropriate statements to highlight the following information that is to be presented to the board: (a) The standard product cost of a Wallop. (3 marks) (b) (i) The direct material variances for both price and usage for each component used in the month of May assuming that prices were stable throughout the relevant period. (ii) The direct labour efficiency and wage rate variances for the month of May. (iii) The fixed production overhead expenditure and volume variances. Note: You may assume that during the month of May there is no change in the level of finished goods stocks. (10 marks) (c) A detailed reconciliation statement of the standard gross profit with the actual gross profit for the month of May. (4 marks) (d) Draft a brief report for Mr Jones that he could present to the board of directors on the usefulness, or otherwise, of the statement you have prepared in your answer to (c) above. (5 marks) ACCA Level 2 Management Accounting