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accounting statement reconciling the budgeted costs

accounting statement reconciling the budgeted costs

FINANCIAL ACCOUNTING
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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Question Six: The upholstery department of a furniture manufacturing business prepared the following statement of standard costs at the start of the calendar year: Standard cost per unit $ 250 150 100 500 Direct material Direct labour Fixed manufacturing overhead In preparing the statement, it was budgeted that 100 units would be completed each month. During the month of May the following results were reported: $ 31,200 16,800 9,600 57,600 Direct materials cost Direct labour cost Fixed manufacturing overhead The actual level of production achieved in May was 120 units. The budget for direct materials was based on an allowance of 10kg materials per unit produced. The budgeted cost f materials was $25 per kg, Actual materials used during May amounted to 1,300kg. The budget for direct labour was based on an allowance of 15 hours per unit, at a labour rate of $10 per hour. At the start of May, an agreed incentive scheme increased the labour rate to at 12 per hour. All employees receive the same rate of раy. Stocks of finished goods are valued at tfull standard cost of manufacture. Required: a) Prepare an accounting statement reconciling the budgeted costs for the month of May with the actual costs incurred, including in your answer relevant cost variances. b) Suggest possible causes for the variances you have calculated
Transcribed Image Text:Question Six: The upholstery department of a furniture manufacturing business prepared the following statement of standard costs at the start of the calendar year: Standard cost per unit $ 250 150 100 500 Direct material Direct labour Fixed manufacturing overhead In preparing the statement, it was budgeted that 100 units would be completed each month. During the month of May the following results were reported: $ 31,200 16,800 9,600 57,600 Direct materials cost Direct labour cost Fixed manufacturing overhead The actual level of production achieved in May was 120 units. The budget for direct materials was based on an allowance of 10kg materials per unit produced. The budgeted cost f materials was $25 per kg, Actual materials used during May amounted to 1,300kg. The budget for direct labour was based on an allowance of 15 hours per unit, at a labour rate of $10 per hour. At the start of May, an agreed incentive scheme increased the labour rate to at 12 per hour. All employees receive the same rate of раy. Stocks of finished goods are valued at tfull standard cost of manufacture. Required: a) Prepare an accounting statement reconciling the budgeted costs for the month of May with the actual costs incurred, including in your answer relevant cost variances. b) Suggest possible causes for the variances you have calculated
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