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Use budget and actual figures to calculate and interpret variances. The retail group has introduced a new product and uses a standard cost system. Standard
Use budget and actual figures to calculate and interpret variances.
The retail group has introduced a new product and uses a standard cost system. Standard costs for 1 000 kilograms of the new product are: Requirements Quantity (Kilograms) Price per kilogram () Total Cost () A 1 600 0.50 800 B 400 0.80 320 C 400 0.20 80 Input 2 400 600 Output 2 000 400 The production of 1 000 kilograms of the new product requires 1 200 kilograms of raw materials. Hence the yield is 1 000/1 200 or 5/6 of input. Materials records indicate. Materials A Opening Inventory 20 000 kilograms 24 000 kilograms 30 000 kilograms Purchases (units) in April 324 000@0.48 60 000 @0.84 64 000 @0.22 Closing Inventory 30 000 kilograms 8 000 kilograms 22 000 kilograms B To convert 1 200 kilograms of raw materials into 1 000 kilograms of finished product required 25 hours of labour at 8.25 per hour. Actual direct labour hours and costs are 3,800 hours at 31,350. Factory overhead is applied on a direct labour hour basis at a rate of 9 per hour (5 fixed, 4 variable). Factory overhead is 36,000 with 4,000 direct labour hours. Actual overheads are 38,000, Actual finished production is 200,000 new products. The standard cost per kilogram of the finished product: Materials Labour 0.60 per kilogram 0.24 per kilogram 0.20 per kilogram Factory overheads The standard selling price per unit 25% mark up on total cost. The actual selling prices 20% mark up on total cost Step by Step Solution
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