The following profit reconciliation statement has been prepared by the management accountant of ABC Limited for March:

Question:

The standard cost card for the company's only product is as follows:
(£)
Materials 5 liters at £0.20 1.00
Labour 4 hours at £12.00 48.00
Variable overhead 4 hours at £1.50 6.00
Fixed overhead 4 hours at £3.50 14.00
69.00
Standard profit 3 00
Standard selling price 72.00
The following information is also available:
1 There was no change in the level of finished goods stock during the month.
2 Budgeted production and sales volumes for March were equal.
3 Stocks of materials, which are valued at standard price, decreased by 800 liters during the month.
4 The actual labour rate was £0.28 lower than the standard hourly rate.
(a) Calculate the following:
(i) The actual production/sales volume;
(ii) The actual number of hours worked;
(iii) The actual quantity of materials purchased;
(iv) The actual variable overhead cost incurred;
(v) The actual fixed overhead cost incurred.
(b) ABC Limited uses a standard costing system whereas other organizations use a system of budgetary control. Explain the reasons why a system of budgetary control is often preferred to the use of standard costing in non-manufacturing environments.

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