Ash Ltd had total overheads for a month of £48,000. The total monthly budgeted labour hours were 2,400 and the total budgeted material usage was 3,200 kg. During the month the company gave a quotation for a job which requires 30 kg of materials at £7 per kg and 15 direct labour hours at £20 per hour. Overheads are recovered on the basis of direct labour hours. The profit is 25% based on selling price. Required: (a)What was the quoted selling price for this job? (b)If the actual direct labours worked on the job were 17 hours, what would be the new profit of this job, assuming that the quoted selling price could not be renegotiated?
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.
3. Ash Ltd had total
budgeted labour hours were 2,400 and the total budgeted material usage was
3,200 kg. During the month the company gave a quotation for a job which
requires 30 kg of materials at £7 per kg and 15 direct labour hours at £20 per
hour. Overheads are recovered on the basis of direct labour hours. The profit
is 25% based on selling price.
Required:
(a)What was the quoted selling price for this job?
(b)If the actual direct labours worked on the job were 17 hours, what
would be the new profit of this job, assuming that the quoted selling
price could not be renegotiated?
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