BRK Co operates an absorption costing system and sells three products, B, R and K which are substitutes for each other. The following standard selling price and cost data relate to these three products:

Budgeted fixed production overhead for the last period was £81 000.
This was absorbed on a machine hour basis. The standard machine hours for each product and the budgeted levels of production and sales for each product for the last period are as follows:

Actual volumes and selling prices for the three products in the last period were as follows:

Required:

(a) Calculate the following variances for overall sales for the last period:
(i) sales price variance;
(ii) sales volume profit variance;
(iii) sales mix profit variance;
(iv) sales quantity profit variance and reconcile budgeted profit for the period to actual sales less standard cost.

(b) Discuss the significance of the sales mix profit variance and comment on whether useful information would be obtained by calculating mix variances for each of these three products.

(c) Describe the essential elements of a standard costing system and explain how quantitative analysis can assist in the preparation of standard costs.

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Selling price Direct material Direct labour Product per unit per unit per unit B 14.00 3.00 kg at 0.5 hrs at 1.80 per kg 6.50 per hour R 15.00 1.25 kg at 0.8 hrs at 3.28 per kg 6.50 per hour K 18.00 1.94 kg at 0.7 hrs at 2.50 per kg 6.50 per hour