Question 3 Owen plc manufactures one product, and the entire product is sold as soon as it is produced. The company operates a standard costing system and analysis of variances is made every month. The standard cost card for a product is as follows. Materials (4 Kg at £4.50 per Kg) Labour (5 Hours at £5 per hr) Variable overheads (5 hrs at £2 per hr) Fixed overheads (5 hrs at £3 per hr) Budgeted selling price is £75 per unit Budgeted production Budgeted sales There is no opening inventory The actual results are as follows: Sales: 8,400 units for £613,200 Production: 8,900 units Actual costs: Materials (35,464 kg): £163,455 Labour: £224,515 Variable overheads: £ 87,348 Fixed overheads: f 134 074 £ per Unit 18 25 10 15 £68 8.700 units 8,000 units

Question 3 Owen plc manufactures one product, and the entire product is sold as soon as it is produced. The company operates a standard costing system and analysis of variances is made every month. The standard cost card for a product is as follows. Materials (4 Kg at £4.50 per Kg) Labour (5 Hours at £5 per hr) Variable overheads (5 hrs at £2 per hr) Fixed overheads (5 hrs at £3 per hr) Budgeted selling price is £75 per unit Budgeted production Budgeted sales There is no opening inventory The actual results are as follows: Sales: 8,400 units for £613,200 Production: 8,900 units Actual costs: Materials (35,464 kg): £163,455 Labour: £224,515 Variable overheads: £ 87,348 Fixed overheads: f 134 074 £ per Unit 18 25 10 15 £68 8.700 units 8,000 units

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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Required:
a) Prepare a flexed budget and calculate the total variances
b) Using the data, analyse each of the cost variances: Materials; Labour;
Variable Overheads and; Fixed Overheads
c) Using data, calculate the Sales price variance and the Sales volume variance

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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