Manufacturing company Alpha s.r.o. produces products Sigma and Omega. The products require a single operation and the standards for this operation are presented in the following table:

Standards	Sigma	Omega
Direct material - standard usage (kg/unit)	2	4
Direct material - standard purchasing price (CZK/kg)	9	9
Standard direct labor hours (DLH/unit)	2	3
Direct labor wage standard rate (CZK/DLH)	11	11
Variable overhead rate (CZK/DLH)	5	5
Total standard variable cost (CZK/unit)	50	84
Standard selling price (CZK/unit)	88	108

Alpha s.r.o. planned to produce and sell 7,500 units of Sigma and 3,400 units of Omega in the month of April. The monthly budgeted fixed overheads amounted to 310,000 CZK. The company uses a variable costing system for internal profit measurement purposes and inventory evaluation.

The actual results of Alpha s.r.o. expressed in Czech Crowns (=CZK) for the April are as follows:

Sales		1,006,800
Direct material	288,000
Direct labor	261,144
Variable overheads	108,810	657,954
Contribution margin		348,846
Fixed overheads		312,108
Actual profit		36,738

Actual production and sales in April were 8,200 units of Sigma (sold at 90 CZK/unit) and 2,400 units of Sigma (sold at 112 CZK/unit).

Questions

1. Assuming a constant sales mix, calculate the budgeted sales in CZK that correspond to the break-even point (BEP).

2. Assuming a constant sales mix, compute the budgeted safety margin in percentage terms for the whole company..

% of budgeted safety margin =?

3. Allocate budgeted fixed cost to 1 unit of product Sigma using direct labor hours as an allocation base.

Budgeted fixed cost per 1 unit of Sigma =?
4. Calculate standard cost per 1 unit of product Sigma using direct labor hours as an allocation base for both overheads

5. Compute total profit variance and decide whether the variance is adverse or favorable (A/F).

Answer rating: 100% (QA)

1 The budgeted sales in CZK that correspond to the breakeven point are BEP sa... View the full answer