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Question 3 (Standard Costing) Autotechs LLP is an engineering performance enhancement specialist in the provision of a particular performance testing service for high-performance road
Question 3 (Standard Costing) Autotechs LLP is an engineering performance enhancement specialist in the provision of a particular performance testing service for high-performance road cars. Autotechs seeks to provide a premium service aimed at discerning corporate users that require optimum performance from their executive cars. In order to do this, it hires teams of specialist staff on a sub-contract basis and pays for the hours that they have worked. The material they use in the process of the tests is associated with Formula 1 (racing) standards and thus it is very expensive. Variable overhead costs are attributed to the tests based on direct labour cost. Budget for June Budgeted number of tests to be performed: 20 tests Per test For 20 tests 10,000 200,000 Sales Revenue Less: Materials 0.1 litres @ 10,000 per litre 1,000 20,000 Labour fee: 2 hours @ 1,500 per hour 3,000 60,000 Variable overheads 2 hours @ 975 per hour 1,950 39,000 Contribution 4,050 81,000 Less: Total fixed overheads for June 48,000 Budgeted profit for June 33,000 QUESTION CONTINUES ON NEXT PAGE
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