repare a statement that reconciles the budgeted and actual profit/loss for december, showing the variances in as much detail as possible form the information provided.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question

Zizi plc uses a standard absorption costing system and produces and sells product 8W. The standard cost card is below:

Product 8W (€ per unit)

Direct material (5 per kg) 15

Direct labour (6 per hour) 12

Fixed manufacturing overhead 10

Total production cost 37

Standard profit 13

Standard selling price 50

* Absorption rate based on standard labour hours

Budgeted and actual production and sales units for december 2020 were as follows:

Budget Actual

Production 1,100 900

Sales   1,000 800

Actual data for December 2020 were as follows

   

Direct material purchases

1,200 kgs costing

12,000

Direct materials used

1,100 kgs

 

Direct labour hours

500 hours costing

6,000

Fixed manufacturing overhead

 

5,000

Sales revenue

 

30,000

An analysis of the Direct labour hours shows that the 500 hours that were paid for 50 were idle time due to a machinery breakdown. There were no inventories of Direct materials or finished products (planned or actual) at the start of the month.

Required:

i) the management accounting has started to reconcile the budgeted and actual profits and has already calculated the following items:

  • Direct material price variance 6,000 Adverse

  • Direct material usage variance 8,000 Favourable

  • Actual profit is 11,200

Prepare a statement that reconciles the budgeted and actual profit/loss for december, showing the variances in as much detail as possible form the information provided.

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education