Somnath Ltd manufactures and sells product G. The company operates a standard marginal costing system, and...

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Somnath Ltd manufactures and sells product G. The company operates a standard marginal costing system, and the standard variable cost of production and selling price of product G is provided in the table below. per unit per unit Selling price Variable production costs 130 Direct Material A (4 per kg) 24 Direct Material B (8 per litre) 16 Direct Labour (9 per hour) 45 Production overhead (3 per hour) 15 Total variable costs (100) Contribution 30 The variable production overhead is incurred in direct proportion to the direct labour hours worked and budgeted fixed manufacturing overheads are 1,200,000 annually. In June 2020, Somnath Ltd budgeted to produce and sell 15,000 units of product G. The finance director projected a profit forecast of 350,000 for the month based on these sales level. In June 2020 however, actual production and sales were 15,500 units and a profit of 417,125 was recorded. There were no inventories at the beginning and at the end the month. The production and purchasing department managers stated that because of their hard work, they have been able to keep costs down and this is reflected in the increased profit for the company. They said they that they deserve to be rewarded with a bonus for their contribution to the increased profits. The CEO of the company asked the management accountant to produce the actual profit statement for June 2017, which is provided below: Sales Revenue (15,500 units) Variable production costs 2,480,000 Direct Material A (100,750 kgs) 453,375 Direct Material B (46,500 litres) 418,500 Direct Labour (93,000 hours) Production overhead (93,000 hours) 744,000 372,000 Total variable costs (1,987,875) Contribution 492,125 Fixed Cost Profit (75,000) 417,125 Somnath Ltd manufactures and sells product G. The company operates a standard marginal costing system, and the standard variable cost of production and selling price of product G is provided in the table below. per unit per unit Selling price Variable production costs 130 Direct Material A (4 per kg) 24 Direct Material B (8 per litre) 16 Direct Labour (9 per hour) 45 Production overhead (3 per hour) 15 Total variable costs (100) Contribution 30 The variable production overhead is incurred in direct proportion to the direct labour hours worked and budgeted fixed manufacturing overheads are 1,200,000 annually. In June 2020, Somnath Ltd budgeted to produce and sell 15,000 units of product G. The finance director projected a profit forecast of 350,000 for the month based on these sales level. In June 2020 however, actual production and sales were 15,500 units and a profit of 417,125 was recorded. There were no inventories at the beginning and at the end the month. The production and purchasing department managers stated that because of their hard work, they have been able to keep costs down and this is reflected in the increased profit for the company. They said they that they deserve to be rewarded with a bonus for their contribution to the increased profits. The CEO of the company asked the management accountant to produce the actual profit statement for June 2017, which is provided below: Sales Revenue (15,500 units) Variable production costs 2,480,000 Direct Material A (100,750 kgs) 453,375 Direct Material B (46,500 litres) 418,500 Direct Labour (93,000 hours) Production overhead (93,000 hours) 744,000 372,000 Total variable costs (1,987,875) Contribution 492,125 Fixed Cost Profit (75,000) 417,125