a) Explain what is meant by basic standards and ideal standards and their effect on employee motivation. b) Sasraku Ltd manufactures and sells standard quality fuel pumps. Other companies integrate these pumps in their production of petrol engines. At present, Sasraku Ltd manufactures only three different types of fuel pumps-oil pump, gas pump and diesel pump. Simon, the Management Accountant, allocates fixed overheads to these pumps on an absorption costing system. The standard selling price, volumes and cost data for these three products for the last period are as follows: Selling price per unit (GH¢) 91.00 for Oil Pump, Gas Pump is GH 97.50 and Diesel Pump selling price is GH117.00. Direct material (GH¢) 35.10 for Oil Pump, GH26.65 for Gas pump and GH31.52 for Diesel Pump. Management provided the following information as well: Direct labour per unit (GH¢6.50 per hour). The respective hours per unit are: Oil Pump use 3.25 hours, Gas pump use 5.20 hours per unit Diesel Pump use 4.55 hours per unit. Standard Machine hours spent on the products were given as follows: Oil Pump 1.95 hours, Gas Pump 3.90 hours and Diesel Pump 5.20 hours. Budgeted production and sales (units) for Oil Pump, Gas Pump and Diesel Pump were given as follow: 10,000, 13,000 and 9,000 respectively. The total fixed production overhead for the last period was estimated in the budget to be GH¢526,500. This was absorbed on a machine hour basis. The Board of Directors has decided to calculate the variances for the period in order to analyse the sales performance of the company. The following information of actual volumes and selling prices for the three products in the last period was obtained. Actual selling price per units for Oil Pumps is GH 94.25, Gas Pumps is GH100.75 and Diesel Pumps is 123.50. Actual production and sales units for the period for Oil Pumps, Gas Pumps and Diesel Pump are: 9,500, 13,500 and 8,500 respectively. Required: Calculate standard profit per unit Calculate the following variances for overall sales for the last period: Sales profit margin variance Sales mix profit variance Sales quantity profit variance Sale volume profit margin

a) Explain what is meant by basic standards and ideal standards and their effect on employee motivation. b) Sasraku Ltd manufactures and sells standard quality fuel pumps. Other companies integrate these pumps in their production of petrol engines. At present, Sasraku Ltd manufactures only three different types of fuel pumps-oil pump, gas pump and diesel pump. Simon, the Management Accountant, allocates fixed overheads to these pumps on an absorption costing system. The standard selling price, volumes and cost data for these three products for the last period are as follows: Selling price per unit (GH¢) 91.00 for Oil Pump, Gas Pump is GH 97.50 and Diesel Pump selling price is GH117.00. Direct material (GH¢) 35.10 for Oil Pump, GH26.65 for Gas pump and GH31.52 for Diesel Pump. Management provided the following information as well: Direct labour per unit (GH¢6.50 per hour). The respective hours per unit are: Oil Pump use 3.25 hours, Gas pump use 5.20 hours per unit Diesel Pump use 4.55 hours per unit. Standard Machine hours spent on the products were given as follows: Oil Pump 1.95 hours, Gas Pump 3.90 hours and Diesel Pump 5.20 hours. Budgeted production and sales (units) for Oil Pump, Gas Pump and Diesel Pump were given as follow: 10,000, 13,000 and 9,000 respectively. The total fixed production overhead for the last period was estimated in the budget to be GH¢526,500. This was absorbed on a machine hour basis. The Board of Directors has decided to calculate the variances for the period in order to analyse the sales performance of the company. The following information of actual volumes and selling prices for the three products in the last period was obtained. Actual selling price per units for Oil Pumps is GH 94.25, Gas Pumps is GH100.75 and Diesel Pumps is 123.50. Actual production and sales units for the period for Oil Pumps, Gas Pumps and Diesel Pump are: 9,500, 13,500 and 8,500 respectively. Required: Calculate standard profit per unit Calculate the following variances for overall sales for the last period: Sales profit margin variance Sales mix profit variance Sales quantity profit variance Sale volume profit margin

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) Explain what is meant by basic standards and ideal standards and their effect on employee motivation.
b) Sasraku Ltd manufactures and sells standard quality fuel pumps. Other companies integrate these pumps in their production of petrol engines. At present, Sasraku Ltd manufactures only three different types of fuel pumps-oil pump, gas pump and diesel pump. Simon, the Management Accountant, allocates fixed overheads to these pumps on an absorption costing system.

The standard selling price, volumes and cost data for these three products for the last period are as follows: Selling price per unit (GH¢) 91.00 for Oil Pump, Gas Pump is GH 97.50 and Diesel Pump selling price is GH117.00. Direct material (GH¢) 35.10 for Oil Pump, GH26.65 for Gas pump and GH31.52 for Diesel Pump. Management provided the following information as well: Direct labour per unit (GH¢6.50 per hour). The respective hours per unit are: Oil Pump use 3.25 hours, Gas pump use 5.20 hours per unit Diesel Pump use 4.55 hours per unit. Standard Machine hours spent on the products were given as follows: Oil Pump 1.95 hours, Gas Pump 3.90 hours and Diesel Pump 5.20 hours. Budgeted production and sales (units) for Oil Pump, Gas Pump and Diesel Pump were given as follow: 10,000, 13,000 and 9,000 respectively. The total fixed production overhead for the last period was estimated in the budget to be GH¢526,500. This was absorbed on a machine hour basis. The Board of Directors has decided to calculate the variances for the period in order to analyse the sales performance of the company. The following information of actual volumes and selling prices for the three products in the last period was obtained. Actual selling price per units for Oil Pumps is GH 94.25, Gas Pumps is GH100.75 and Diesel Pumps is 123.50. Actual production and sales units for the period for Oil Pumps, Gas Pumps and Diesel Pump are: 9,500, 13,500 and 8,500 respectively.

Required:

Calculate standard profit per unit
Calculate the following variances for overall sales for the last period:

Sales profit margin variance
Sales mix profit variance
Sales quantity profit variance
Sale volume profit margin

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