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TP makes wedding cakes that are sold to specialist retail outlets, which decorate the cakes according to the customers' specific requirements. The standard cost per

TP makes wedding cakes that are sold to specialist retail outlets, which decorate the cakes according to the customers' specific requirements. The standard cost per unit of its most popular cake is as follows: Direct material: $ Ingredient A 4kg at $25 per kg 100 Ingredient B 3kg at $22 per kg 66 Ingredient C 2kg at $11.50 per kg 23 Direct labour: 3 hours at $12 per hour 36 Variable overhead: 3 hours at $8 per hour 24 Standard cost: 249 The budgeted production for the period was 10,000 units. Actual results for the period were as follows: Production: 9,000 units. Direct material: $ Ingredient A 35,000kg 910,000 Ingredient B 28,000kg 630,000 Ingredient C 27,000kg 296,000 Direct labour: 30,000 hours 385,000 Variable overhead: 230,000

The general market prices at the time of purchase for ingredient A and ingredient B were $23 per kg and $20 per kg respectively. Explain how to go about preparing a statement that reconciles the flexed budget material cost and the actual material cost. Your statement should include the material price planning variances and the operational variances, including material price, material mix and material yield (12 marks).

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