God’s Will Ent., GWT, started its business in 2021. The following information was available for January to March 31, 2021 for the company that started to produce a single product: GHȻ Selling price per unit 200 Direct materials per unit 40 Direct Labour per unit 20 Fixed factory overhead per month 60,000 Variable factory overhead per unit 10 Fixed selling overheads 2000 Variable selling overheads per unit 8 Budgeted activity was expected to be 2,000 units each month Production and sales for each month were as follows: January February March Unit sold 2,000 1,600 2,200 Unit produced 2,000 2,600 1,800 Required: Prepare profit statements based on absorption costing system, for God’s Will Ent., GWT, for the three months ending 31/03/2021.
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.
QUESTION
God’s Will Ent., GWT, started its business in 2021. The following information was available for
January to March 31, 2021 for the company that started to produce a single product:
GHȻ
Selling price per unit 200
Direct materials per unit 40
Direct Labour per unit 20
Fixed factory overhead per month 60,000
Variable factory overhead per unit 10
Fixed selling
Variable selling overheads per unit 8
Budgeted activity was expected to be 2,000 units each month
Production and sales for each month were as follows:
January February March
Unit sold 2,000 1,600 2,200
Unit produced 2,000 2,600 1,800
Required:
Prepare profit statements based on absorption costing system, for God’s Will Ent., GWT, for the
three months ending 31/03/2021.
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