Armoured Kangaroo Limited manufactures one product, a boomerang. The standard cost for a boomerang is as follows: £ Direct materials - 0.5 kg @ £4.00 per kg 2.00 Direct wages - 2 hours @ £2.00 per hour 4.00 Variable overheads - 2 hours @ £0.30 per hour .60 Fixed overheads 7.40 ____ Standard cost 14.00 Budgeted selling price 20.00 Budgeted output for the month of June 2020 was 5,100 units Actual results for June 2020 were as follows: Qty £ Units sold 4,850 units 95,600 Materials used 2,300 kg 9,800 Labour hours worked 8,000 hours 15,812 Variable overheads 2,600 Fixed overheads 42,300 REQUIRED: a) Calculate all relevant variances. b) Prepare an operating statement for the month of June 2020.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Armoured Kangaroo Limited manufactures one product, a boomerang. The
£
Direct materials - 0.5 kg @ £4.00 per kg 2.00
Direct wages - 2 hours @ £2.00 per hour 4.00
Variable
Fixed overheads 7.40
____
Standard cost 14.00
Budgeted selling price 20.00
Budgeted output for the month of June 2020 was 5,100 units
Actual results for June 2020 were as follows:
Qty £
Units sold 4,850 units 95,600
Materials used 2,300 kg 9,800
Labour hours worked 8,000 hours 15,812
Variable overheads 2,600
Fixed overheads 42,300
REQUIRED:
- a) Calculate all relevant variances.
- b) Prepare an operating statement for the month of June 2020.
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