Question
Manufacturing company Alpha s.r.o. produces products Sigma and Omega. The products requires a single operation and the standards for this operation is presented in the
Manufacturing company Alpha s.r.o. produces products Sigma and Omega. The products requires a single operation and the standards for this operation is presented in the following table:
Standards | Sigma | Omega |
Direct material - standard usage (kg/unit) | 2 | 4 |
Direct material - standard purchasing price (CZK/kg) | 9 | 9 |
Standard direct labour hours (DLH/unit) | 2 | 3 |
Direct labour wage standard rate (CZK/DLH) | 11 | 11 |
Variable overhead rate (CZK/DLH) | 5 | 5 |
Total standard variable cost (CZK/unit) | 50 | 84 |
Standard selling price (CZK/unit) | 88 | 108 |
Alpha s.r.o. planned to produce and sell 7,500 units of Sigma and 3,400 units of Omega in the month of April. The monthly budgeted fixed overheads amounted to 310,000 CZK. The company uses a variable costing system for internal profit measurement purposes and inventory evaluation. The actual results of Alpha s.r.o. expressed in Czech Crowns (=CZK) for the April are as follows:
Sales | 1,006,800 | |
Direct material | 288,000 | |
Direct labour | 261,144 | |
Variable overheads | 108,810 | 657,954 |
Contribution margin | 348,846 | |
Fixed overheads | 312,108 | |
Actual profit | 36,738 |
Actual production and sales in April were 8,200 units of Sigma (sold at 90 CZK/unit) and 2,400 units of Sigma (sold at 112 CZK/unit).
Questions
1. For product Omega, compute sales contribution margin volume variance and decide whether the variance is adverse or favourable (A/F) and decide whether the variance is adverse or favourable (A/F).
2. For both products, compute the sales price variances and decide whether the variance is adverse or favourable (A/F).
3. For both products, compute the total direct labour variance and decide whether the variance is adverse or favourable (A/F).
4. Compute the fixed overhead expenditure (spending) variance and decide whether the variance is adverse or favourable (A/F).
5.Compute the total variable overhead variance and decide whether the variance is adverse or favourable (A/F).
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