Goodwood Ltd manufactures and distributes a single product known as Fin Plates. The standard cost card of
Question:
Goodwood Ltd manufactures and distributes a single product known as “Fin Plates”. The standard cost card of BHP Ltd is shown below.
Goodwood Ltd – Standard Cost Card
Product: Trim-Fin (Currently attainable standards) | ||
Description | Quantities and prices | Unit |
£ | ||
Direct materials | 2.00 kilos @ £3.00 per kilo | 6 |
Direct labour | 0.75 minutes @ £12.00 per hour | 9 |
Fixed overhead | £16.00 per unit | 16 |
Standard total unit cost: | 31 | |
Standard selling price: | 45 | |
Standard unit gross profit: | 14 |
Other information:
The fixed overhead absorption rate is based on a consistent monthly production and sales of 2,000 units
Actual trading results for March 2021 are:
Goodwood Ltd
Actual Trading Results (March 2021)
£ | £ | |
Sales (for 2,200 units produced and sold) | 95,000 | |
Direct materials (for 5,300 kilos consumed) | 15,000 | |
Direct labour (1,700 hours recorded) | 20,000 | |
Fixed overhead | 45,000 | |
Cost of sales: | 80,000 | |
Gross profit: | 15,000 |
Required:
a. Prepare a detailed analysis of the variances from standard that will reconcile expected (standard) and actual profits for March 2021
b. Define the terms ‘planning’ and ‘operational’ variance, and explain the significance of each to management planning and control operations
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer