Question 2 The following report has been produced for the production department for the ABC Company for the month of June 2022: Виdget Actual 12,800 Variance 2,800 (F) Volume (units) 10,000 £ £ Direct materials Other materials 105,000 132,000 27,000(A) 4,700 5,800 1,100 (A) Direct labour 135,000 145,000 105,600 32,000 10,000(A) 9,600(A) Production overheads 96,000 Head office recharges 26,000 6,000 (A) Total 366,700 420,400 53,700(A) • Direct materials and other materials are variable costs. • Direct labour includes fixed salary costs of £110,000 the balance is variable. • The production overhead includes a variable cost that is constant at all volume levels, and a stepped fixed cost which changes when the volume level exceeds 11,000 units. • A further analysis of the production overheads is shown below: Volume (units) 8,000 10,000 12,000 Costs (£) £91,200 £96,000 £115,800 Required a. Compute budgeted rates for • Direct materials • Other materials Variable direct labor cost b. Using high-low method compute variable production overheads rate and fixed production overheads at actual volume of production c. Prepare flexed budget for the actual level of production d. Calculate variances between actual costs and flexed budget costs, state whether the variances are favorable (F) or adverse (A)
Question 2 The following report has been produced for the production department for the ABC Company for the month of June 2022: Виdget Actual 12,800 Variance 2,800 (F) Volume (units) 10,000 £ £ Direct materials Other materials 105,000 132,000 27,000(A) 4,700 5,800 1,100 (A) Direct labour 135,000 145,000 105,600 32,000 10,000(A) 9,600(A) Production overheads 96,000 Head office recharges 26,000 6,000 (A) Total 366,700 420,400 53,700(A) • Direct materials and other materials are variable costs. • Direct labour includes fixed salary costs of £110,000 the balance is variable. • The production overhead includes a variable cost that is constant at all volume levels, and a stepped fixed cost which changes when the volume level exceeds 11,000 units. • A further analysis of the production overheads is shown below: Volume (units) 8,000 10,000 12,000 Costs (£) £91,200 £96,000 £115,800 Required a. Compute budgeted rates for • Direct materials • Other materials Variable direct labor cost b. Using high-low method compute variable production overheads rate and fixed production overheads at actual volume of production c. Prepare flexed budget for the actual level of production d. Calculate variances between actual costs and flexed budget costs, state whether the variances are favorable (F) or adverse (A)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 2
The following report has been produced for the production department for the ABC
Company for the month of June 2022:
Actual
Вudget
10,000
Variance
Volume (units)
12,800
2,800 (F)
Direct materials
105,000
132,000
5,800
27,000(A)
Other materials
4,700
1,100 (A)
Direct labour
135,000
145,000
10,000(A)
Production overheads
96,000
105,600
9,600(A)
Head office recharges
26,000
32,000
6,000 (A)
Total
366,700
420,400
53,700(A)
• Direct materials and other materials are variable costs.
• Direct labour includes fixed salary costs of £110,000 the balance is variable.
The production overhead includes a variable cost that is constant at all volume
levels, and a stepped fixed cost which changes when the volume level exceeds
11,000 units.
• A further analysis of the production overheads is shown below:
Volume (units)
8,000
10,000
12,000
Costs (£)
£91,200
£96,000
£115,800
Required
a. Compute budgeted rates for
• Direct materials
Other materials
Variable direct labor cost
b. Using high-low method compute variable production overheads rate and fixed
production overheads at actual volume of production
c. Prepare flexed budget for the actual level of production
d. Calculate variances between actual costs and flexed budget costs, state whether
the variances are favorable (F) or adverse (A)
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