Information relating to actual costs and variances for year 2019 is shown below. The budgeted production for year 2019 was 42,000 products. Actual data Actual production 43,200 products Direct materials costs:32,400 kg RM162,000 Direct labour costs: 17,280 hours RM217,728 Variable production overhead costs RM108,000 Fixed production overhead costs RM170,400 Variances Direct material price variance RM8,100 (F) Direct material usage variance RM11,340 (F) Direct labour rate variance RM1,724 (F) Direct labour efficiency variance RM54,864 (F) Variable production overhead expenditure variance RM864 (A) Variable production overhead efficiency variance RM26,784 (F) Fixed production overhead variance RM7,550 (A) The company operates a standard variable costing system. REQUIRED Using the information provided above, prepare: (a) The standard cost card for one product. (b) A flexible budget performance report showing the fixed budget, flexed budget, actual results and flexible budget variances for the year. (c) Do you agree or disagree with the following statement? Justify your answer with refer to part (a) and (b). Flexible budget is useful for controlling purpose in an organization. (Words requirement: 200 words ± 10%)
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.
Information relating to actual costs and variances for year 2019 is shown below. The budgeted production for year 2019 was 42,000 products.
Actual data
| Actual production |
43,200 products |
| Direct materials costs:32,400 kg |
RM162,000 |
| Direct labour costs: 17,280 hours |
RM217,728 |
| Variable production |
RM108,000 |
| Fixed production overhead costs |
RM170,400 |
Variances
| Direct material price variance |
RM8,100 (F) |
| Direct material usage variance |
RM11,340 (F) |
| Direct labour rate variance |
RM1,724 (F) |
| Direct labour efficiency variance |
RM54,864 (F) |
| Variable production overhead expenditure variance |
RM864 (A) |
| Variable production overhead efficiency variance |
RM26,784 (F) |
| Fixed production overhead variance |
RM7,550 (A) |
The company operates a standard variable costing system.
REQUIRED
Using the information provided above, prepare:
(a) The
(b) A flexible budget performance report showing the fixed budget, flexed budget, actual results and flexible
(c) Do you agree or disagree with the following statement? Justify your answer with refer to part (a) and (b).
Flexible budget is useful for controlling purpose in an organization.
(Words requirement: 200 words ± 10%)
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