Question 12

Larouci plc is a large company operating in the chemicals industry. Laroucis Liverpool plant produces a single product: an insecticide called Fabinho, which is sold in canisters.

The budgeted data for the April is provided below:

Standard selling price	440
Direct materials: 6 litres at 17 per litre	(102)
Direct labour: 4 hours at 14.50 per hour	(58)
Standard contribution per unit	280

The budgeted level of production and sales was 3,000 canisters. The actual results for April were as follows:

Actual production and sales	3,300 canisters
Actual selling price	410 per canister
Actual direct materials	19,200 litres costing a total of 345,600
Actual direct labour	13,000 hours costing a total of 195,000

Required

1. Prepare the original April budget and a flexed April budget using the actual canisters sold in April. (5 marks)

2. Calculate the following variances using the budgets in (a) and the actual performance for April.
   1. Sales volume
   2. Sales price
   3. Direct labour efficiency
   4. Direct labour rate
   5. Direct material usage
   6. Direct material rate

(12 marks)

3. Produce a reconciliation statement comparing the original budgeted and actual profits of Larouci for the month of April. (3 marks)