7. X Ltd makes a single product and uses standard marginal costing. The standard cost data...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
7. X Ltd makes a single product and uses standard marginal costing. The standard cost data for the product are: Standard cost data per unit € Selling price 175 Direct materials (8 kgs at €2) Direct labour (4 hours at €5) Variable overhead (4 hours at €15) Marginal costs The average product volume per period is 500 units but during Period 5 only 450 units were made and sold. At the end of the period the following variance statement was prepared. 16 20 60 96 Results for Period 5 Budget (500 units) Actual Variance (450 units) € Sales 87,500 83,250 4,250 A Less: marginal cost Direct 8,000 (3,690 kgs used) 7,650 350 F materials 10,000 (1,840 hours worked) 8,100 1,900 F Direct labour Variable 30,000 28,350 1,650 F overheads Marginal cost Contribution 48,000 39,500 44,100 39,150 24,650 350 A Less: 350 F fixed costs 25,000 14,500 Profit 14,500 After studying the above report, the General Manager expressed surprise that all the cost variances were favourable as he understood that there had been some production problems. Furthermore, the Sales manager had told him that he had been able to make some excellent sales during the period which seemed at odds with the statement. Required: (a) To reconcile budgeted contribution to actual contribution with the use of flexible budgeting approach, adjust for fixed costs and disclose the actual profit; (10 marks) (b) To write a report, briefly explaining the difference between the revised presentation in (a) and the original statement. (10 marks) (c) The General Manager mentions that he has seen an article stating that standard costing is becoming less useful in modern factories. He is puzzled by this and wonders whether the company should stop using the technique. You are required to prepare a reply to the General Manager explaining what the article refers to, and giving your opinion on whether standard costing should continue to be used within the company. 7. X Ltd makes a single product and uses standard marginal costing. The standard cost data for the product are: Standard cost data per unit € Selling price 175 Direct materials (8 kgs at €2) Direct labour (4 hours at €5) Variable overhead (4 hours at €15) Marginal costs The average product volume per period is 500 units but during Period 5 only 450 units were made and sold. At the end of the period the following variance statement was prepared. 16 20 60 96 Results for Period 5 Budget (500 units) Actual Variance (450 units) € Sales 87,500 83,250 4,250 A Less: marginal cost Direct 8,000 (3,690 kgs used) 7,650 350 F materials 10,000 (1,840 hours worked) 8,100 1,900 F Direct labour Variable 30,000 28,350 1,650 F overheads Marginal cost Contribution 48,000 39,500 44,100 39,150 24,650 350 A Less: 350 F fixed costs 25,000 14,500 Profit 14,500 After studying the above report, the General Manager expressed surprise that all the cost variances were favourable as he understood that there had been some production problems. Furthermore, the Sales manager had told him that he had been able to make some excellent sales during the period which seemed at odds with the statement. Required: (a) To reconcile budgeted contribution to actual contribution with the use of flexible budgeting approach, adjust for fixed costs and disclose the actual profit; (10 marks) (b) To write a report, briefly explaining the difference between the revised presentation in (a) and the original statement. (10 marks) (c) The General Manager mentions that he has seen an article stating that standard costing is becoming less useful in modern factories. He is puzzled by this and wonders whether the company should stop using the technique. You are required to prepare a reply to the General Manager explaining what the article refers to, and giving your opinion on whether standard costing should continue to be used within the company.
Expert Answer:
Answer rating: 100% (QA)
Answer a Particulars Per unit Budgeted 500 units Actual 450 units Sales 78750 83250 Less Marginal Co... View the full answer
Related Book For
Accounting For Managers Interpreting Accounting Information for Decision Making
ISBN: 978-1119979678
4th edition
Authors: Paul M. Collier
Posted Date:
Students also viewed these accounting questions
-
Following are the annual cost data for a tomato press. Year Cash Flow 0.................-$210,000 1.....................88,000 2.....................68,000 3.....................62,000...
-
The following cost data for the year just ended pertain to Heartstrings, Inc., a greeting card manufacturer: Service department costs * ............... $ 50,000 Direct labor: wages .....................
-
The following cost data for the current year relate to Heartstrings Pty Ltd, a greetings card manufacturers Required: Calculate each of the following costs for the year: 1. Total prime costs. 2....
-
Show that the rectangular box (including the top and bottom) with fixed volume V = 27 m 3 and smallest possible surface area is a cube (Figure 25). X y Z
-
Prove that if {v1, v2, ( ( ( ( vk} is a basis for a vector space V, then {cv1, v2, ( ( ( ( vk}, for c ( 0, is also a basis for V.
-
What is the most abundant element for Earth as a whole?
-
If a well-behaved investment alternative's internal rate of return (IRR) is equal to MARR, which of the following statements about the other measures of worth for this alternative must be true? 1....
-
Permanent Fund and Related Special Revenue Fund Transactions Annabelle Benton, great-granddaughter of the founder of the Town of Benton, made a cash contribution in the amount of $500,000 to be held...
-
Deliverable length: 300 - 400 words for four discussions. Compare and contrast benefits and challenges that exist between centralized database management systems and distributed database management...
-
This program currently fails to compile. Modify TripleMin() so that item1 can be of a different type than item2 and item3. #include <iostream> using namespace std; template<typename...
-
Consider the top-down view of a quadcopter drone shown in diagram below. The drone can freely move in the plane and each of the rotors can rotate about their centers. Point P is located at the end of...
-
Bond prices and yields Assume that the Financial Management Corporation's $1,000-par-value bond has a 5.200% coupon, matures on May 15, 2027, has a current price quote of 95.737 and a yield to...
-
Errors can be syntax errors or logic errors (the code works, but not as intended). Which of the following statements contains an error? I. System.out.println("Weight (kg): +(int) (10 II....
-
Hard copy receipts, bar codes and QR codes are all examples of documents a company may use to track costs.
-
Chapter 6 1. Although work on the windmill was voluntary, how does Napoleon ensure that all work on it? Why are the animals still happy to do the extra? 2. A smear campaign is begun against Snowball....
-
This case invites you to evaluate a firm's short-term credit risk and proximity to being in financial distress, and internalize the primacy of cash and cash flow in such situations. At the top of the...
-
What is the GIS software package that uses census data and other existing databases to estimate damage and losses from earthquakes, tsunami, hurricane winds, and floods ?
-
Describe a job you have had in the past or a job you are very familiar with. Indicate the negative aspects of the job and how it could be improved with current human resource management techniques.
-
Opening stock is 350,000. Closing stock is 325,000. Purchases are 650,000. Sales are 1,000,000. The cost of sales is: d) 675,000
-
Calculate the following ratios: Return on investment (ROI) Return on capital employed (ROCE) Operating margin Gross margin Sales growth Working capital to sales Gearing Asset turnover
-
Management has asked you to prepare a variance report and reconcile the budget and actual result. Management believes that a flexible budget may be helpful in understanding the variances.
-
Which strategy for entering a new international market should (a) an architectural design firm, (b) an online discount broker, and (c) a satellite TV channel consider, and why?
-
How can a firm design perceived control into a service encounter? Apply it to one face-to-face and one online encounter.
-
Give examples of how Internet and telecommunications technologies (e.g., mobile commerce [M-Commerce] and apps) have changed some of the services you use.
Study smarter with the SolutionInn App