General plc has recently implemented a system of standard costing. It now has the actual results...

 

 

 

 

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General plc has recently implemented a system of standard costing. It now has the actual results for the first month of the system's operation to compare with its standard figures. Standard costs: Material per unit Labour hour per unit Variable overheads 14 kg at 8 per kg 6 hours at 10 per hour 6 hours at 6 per hour 34,000 Fixed overheads Standard production and sales quantity per month: 3,400 units. Standard selling price: 250 per unit Actual results for the month: Sales 3,500 units at 260 per unit Materials 386,750 for 45,500 kg Labour 192,500 for 19,250 hours Variable overheads 122,400 Fixed overheads 34,000 Required: a) Compute operating profit based on standard costing. b) Compute operating profit for the actual results. (8 marks) (7 marks) c) Compute the following variances, stating whether each one is favourable or adverse. (i) Material price variance (ii) Material usage variance (iii) Labour rate variance (iv) Labour efficiency variance (v) Total of the above 4 variances General plc has recently implemented a system of standard costing. It now has the actual results for the first month of the system's operation to compare with its standard figures. Standard costs: Material per unit Labour hour per unit Variable overheads 14 kg at 8 per kg 6 hours at 10 per hour 6 hours at 6 per hour 34,000 Fixed overheads Standard production and sales quantity per month: 3,400 units. Standard selling price: 250 per unit Actual results for the month: Sales 3,500 units at 260 per unit Materials 386,750 for 45,500 kg Labour 192,500 for 19,250 hours Variable overheads 122,400 Fixed overheads 34,000 Required: a) Compute operating profit based on standard costing. b) Compute operating profit for the actual results. (8 marks) (7 marks) c) Compute the following variances, stating whether each one is favourable or adverse. (i) Material price variance (ii) Material usage variance (iii) Labour rate variance (iv) Labour efficiency variance (v) Total of the above 4 variances

Answer rating: 100% (QA)

a To compute the operating profit based on standard costing we need to calculate the standard costs and deduct them from the sales revenue Standard ma... View the full answer