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- 9 Marks
Question
You have been asked as a cost accountant to reconcile the Budgeted profit to the actual profit using the variance report generated by the management accountant.
i. Calculate the sales variances (2 marks)
ii. The total material variance (1 mark)
iii. The total wage variances (1 mark)
iv. Total manufacturing overhead variances (1 mark)
v. Reconciliation of Budget profit to the actual profit (4 marks)
(Total = 9 marks)
Answer
i) Sales Price Variance:
Sales price variance = (Actual contribution – Standard contribution) x Actual quantity
= (¢55 – ¢50) x 9000 = ¢45,000F
Sales Volume Variance:
(Actual volume – Standard volume) x Standard contribution
= (9000 – 10,000) x 50 = 50,000A
Total Sales Variance:
Sales margin price variance = ¢45,000F
Sales margin volume variance = ¢50,000A
Total sales variance = ¢5,000A
ii) Total Material Variance:
Total material variance = Material price variance + Material usage variance
= 22,250A + 66,250A = 88,500A
iii) Total Wage Variance:
Total wage variance = Wage rate variance + Labour efficiency variance
= ¢42,750A + ¢33,750A = ¢76,500A
iv) Total Manufacturing Overhead Variance:
Total manufacturing overhead variance = Fixed overhead expenditure variance + Variable overhead expenditure variance + Variable overhead efficiency variance
= 10,000F + 12,500F + 7,500A = 15,000F
v) Reconciliation of Budgeted Profit to Actual Profit:
| Item | GHS |
|---|---|
| Budgeted net profit | 200,000 |
| Sales variances: | |
| Sales margin price | 45,000F |
| Sales margin volume | 50,000A |
| Total Sales Variance | 5,000A |
| Direct cost variance: | |
| Material price | 66,250A |
| Material usage | 22,250A |
| Total material variance | 88,500A |
| Total wage variance: | |
| Wage rate variance | 42,750A |
| Labour efficiency | 33,750A |
| Total wage variance | 76,500A |
| Total overhead variance: | |
| Fixed overhead expenditure variance | 10,000F |
| Variable overhead expenditure variance | 12,500F |
| Variable overhead efficiency variance | 7,500A |
| Total overhead variance | 15,000F |
| Total Variance | 155,000A |
| Profit | 45,000 |
- Topic: Standard Costing and Variance Analysis
- Series: NOV 2015
- Uploader: Joseph