Question 2

Hinton Ltd has the following standard cost card for producing 1 unit of its only product

Direct materials 5kg at 18/kg 90

Direct labour 6hrs at 11/hr 66

Fixed overheads 24

==

Full cost 180

The standard selling price is 210 per unit.

The actual results recorded for May were as follows:

Actual

Units produced and sold 2,400

Sales 492,000

Direct materials 13,200kg 217,800

Direct labour 16,800hrs 176,400

Fixed overheads 68,700

======

Profit 29,100

The budgeted sales volume for May was 2,250 units

Required

(a) Prepare the original budget and a budget flexed to the actual volume. Use these and other calculated relevant variances to prepare a statement that reconciles the budgeted to the actual profit for May in as much detail as the information will allow (you should state clearly whether the variances are adverse or favourable).

(15 marks)

(b) Comment on the performance of Hinton Ltd for the month of May referring to the variances calculated above, and include suggestions for possible reasons for the variances you have calculated

(10 marks)

TOTAL 25 MARKS