Following is the information about cost system of K and A Ltd. For the year ended 31 October 1998.Estimate of revenue and costs for

10 000 units.

$Revenue300 000Costs:

Direct materials (10 000 kilos)  

60 000Direct labor (at $11 per hour)

132 000Fixed overheads

70 000 Actual revenue and costs for

18 000 units $Revenue 504 000Costs:Direct materials (17 560 kilos)

119 408Direct labor (23 000 hours)

233 450Fixed overheads 70 000 Required; 

(a)Calculate the following variances also state whether are favorable or un-Favorable.

(i)quantity (the difference between the profits expected on10 000 units and the profit which would be expected on 18 000 units);

(ii)sales price;

(iii)direct material usage and price;

(iv)Direct labor efficiency and rate.

(b)Prepare a financial statement reconciling the expected profit to the actual profit showing the variances calculated in (a). 

Answer rating: 100% (QA)

Solution a VARIANCES i Quantity variance Actual units Expected units Profit per unit 18000 10000 Act... View the full answer