- 15 Marks
MA – May 2017 – L2 – Q5 – Standard costing and variance analysis
Prepare a statement reconciling budgeted profit with actual profit, showing individual variances in detail.
Question
You are the Management Accountant of ABS Limited. The following computer printout shows details relating to June 2017.
| Description | Actual | Budget |
|---|---|---|
| Sales volume (units) | 4,900 | 5,000 |
| Selling price per unit (GH¢) | 11.00 | 10.00 |
| Production volume (units) | 5,400 | 5,000 |
| Direct materials: | ||
| – Quantity (kg) | 10,600 | 10,000 |
| – Price per kg (GH¢) | 0.60 | 0.50 |
| Direct labour: | ||
| – Hours per unit | 0.55 | 0.50 |
| – Rate per hour (GH¢) | 3.80 | 4.00 |
| Fixed overhead: | ||
| – Production (GH¢) | 10,300 | 10,000 |
| – Administration (GH¢) | 3,100 | 3,000 |
ABS Limited uses a standard absorption costing system. There was no opening or closing work-in-progress.
Required:
Prepare a statement that reconciles the budgeted profit with the actual profit for June 2017, showing individual variances in detail. (15 marks)
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