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Question 3 Prost plc produces small carbon fibre shells that are one minor component used in the manufacture of racing cars. The manufacture of such
Question 3 Prost plc produces small carbon fibre shells that are one minor component used in the manufacture of racing cars. The manufacture of such shells is a relatively stable process which does not alter significantly year on year: however, the price of the material that is used for production can vary significantly and it can be challenging to find suitable and appropriately qualified labour.' Prost has the following information available for the last production period. Original budget Revised figure Actual figure- Carbon fibre price per kg $40 $42 $45 Labour hours per unit of production 5 Selling price per unit $630 $680 $690 t 6 7 The budgeted direct labour wage rate is $75 per hour. Including waste, each unit produced is expected to use 2.5kg of carbon fibre. Further details for the last production period are: Budgeted production and sales of the carbon fibre shell Actual production and sales Actual material purchased and issued 2,000 units 2,350 units 6,100 kg Actual direct wage rate $79 per hour Prost plc has no stock left at the end of the production period. Required: a) Prepare a summary statement for the accounting period that reconciles budgeted contribution and actual contribution where a planning and operational (ex-ante, ex-post) variance system is in use. (20 marks) + b) Based on your results for part a) evaluate the usefulness of the planning and operational variance analysis for Prost plc. (10 marks)- Total 30 marks
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