Answered: A company has the following standard…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company has the following standard cost card for a product:

	£
Selling price	2.50
Variable costs	1.95
Fixed cost	0.15

The original budget was to make and sell 110,000, but in fact 125,000 were produced and 120,000 sold for total revenue of £295,000.

Which of the following are the correct variances?

	Sales volume	Sales price
A	4,000 F	5,000 A
B	4,000 F	5,000 F
C	25,000 F	20,000 A
D	25,000 F	20,000 F

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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