Question 3

CABCo operates an absorption costing system and sells three products B, R and K which are substitutes for each other. The following standard selling price and cost data relate to these three products:

Products Selling price Direct material/unit Direct labour/unit

B GHS14.00 3 kgs @ GHS1.80/kg 0.5 hours @ GHS6.50/hour

R GHS15.00 1.25 kgs @ GHS3.28/kg 0.8 hours @ GHS6.50/hour

K GHS18.00 1.94 kgs @ GHS2.50/kg 0.7 hours @ GHS

Budgeted fixed production overhead for the last period was GHS81,000. This was absorbed on a machine hour basis. The standard machine hours for each product and the budgeted levels of production and sales for each product for the last periods are as follows:

Product B R K

Standard machine hours per unit 0.3hours 0.6hours 0.8hours

Budgeted production and sales (units) 10,000 13,500 8,500

Actual volumes and selling prices for the three products in the last period were as follows

Product B R K

Actual selling price per unit GHS14.50 GHS15.50 GHS19.00

Actual production and sales (units) 9,500 13,500 8,500

Calculate the following variances for overall sales for the last period:

1. Sales price variance
2. Sales volume profit variance
3. Sales mix profit variance
4. Sales quantity profit variance