Required:

Prepare an operating statement reconciling the original monthly budgeted profit with the actual monthly profit using variance analysis. You should show all workings.

Clavis Ltd operates a standard absorption costing system for the manufacture of Product KL. The standard cost for Product KL is as follows: Rs Standard selling price 600 Direct materials 2kgs @ Rs60 per kg 120 Direct labour 1.25 hours @ Rs120 per hour 150 Variable overheads 1.25 hours @ Rs60 per hour 75 Fixed overheads 1.25 hours @ Rs120 per hour 150 The company budgets for 10,000 standard direct labour hours per month and production overheads are absorbed on a direct labour hour basis. Actual information for the month of March 2015 revealed the following: Actual sales Direct materials Direct labour Variable overheads Fixed overheads 8,750 units 16,900 kgs 10,780 hours Rs 5,040,000 Rs 1,034,280 Rs 1,358,280 Rs 660,000 Rs 1,368,000