- 15 Marks
MA – July 2023 – L2 – Q2a – Budgetary control
This question involves preparing a statement to reconcile the budgeted contribution with the actual contribution using marginal costing principles and detailed variance analysis.
Question
Bekwai manufactures and sells a single product. The company operates a standard marginal costing system and a just-in-time purchasing and production system. No inventory of raw materials or finished goods is held.
Details of the budget and actual data for the period are as follows:
Budget data:
| Standard production cost per unit: | |
|---|---|
| Direct material: 8kg @ GH¢10.80 per kg | 86.40 |
| Direct labour: 1.25 hours @ GH¢18.00 per hour | 22.50 |
| Variable overheads: 1.25 hours @ GH¢6.00 per hour | 7.50 |
Standard selling price: GH¢180 per unit
Budgeted fixed production overheads: GH¢170,000
Budgeted production and sales: 10,000 units
Actual data:
- Direct material: 74,000 kg @ GH¢11.20 per kg
- Direct labour: 10,800 hours @ GH¢19.00 per hour
- Variable overheads: GH¢70,000
- Actual selling price: GH¢184 per unit
- Actual fixed production overheads: GH¢168,000
- Actual production and sales: 9,000 units
Required:
Using marginal costing principles, prepare a statement that reconciles the budgeted contribution and the actual contribution. (Your statement should show the variances in as much detail as possible).
(15 marks)
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