Tutorial Task 1 HB makes and sells a single product. The company operates a standard marginal costing system and a just-in-time purchasing and production system. No inventory of raw materials or finished goods is held. Details of the budget and actual data for the previous period are given below: Budget data Standard production costs per unit: Direct material 8kg @ 10.80 per kg 86.40 Direct labour 1.25 hours @ 18.00 per hour 22.50 Variable overheads 1.25 hours @ 6.00 per direct labour hour 7.50 Standard selling price: 180 per unit Budgeted fixed production overheads: 170000 Budgeted production and sales: 10000 units Actual data Direct material: 74 00Okg @ 11.20 per kg Direct labour: 10800 hours @ 19.00 per hour Variable overheads: 70000 Actual selling price: 184 per unit Actual fixed production overheads: 168000 Actual production and sales: 9000 units Required:

a) Prepare a statement using marginal costing principles that reconciles the budgeted profit and the actual profit. Your statement should show the variances in as much detail as possible.

b) Explain why the variances used to reconcile profit in a standard marginal casting system are different from those used in a standard absorption costing system.

c) Calculate the variances that would be different and any additional variances that would be required if the reconciliation statement was prepared using standard absorption costing. Note: Preparation of a revised statement is not required.