chapter6casestudyforhomework - Section A Answer All...

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Unformatted text preview: Section A Answer All questions 1' . . . - , Brailey Corporation Ltd manufactures sophisticated industrial valves. At present, a new product; Model V68; is made and sold. There is“no opening or closing inventory and work progress could be neglected. The market prices for the materialand the productrval've Model V68 are stable. Brailey Corporation operates a standard costing system and it calculates the different cost variances for better management control. The‘cost information for July and August is available as follow. ' 1 : Last. month: July i) The purchasing department manager, Laura, is required to explain the operation process in the month. Laura has negotiated with a new supplier and purchased cheaper material with. large amount of discount. ' I ii) The production department iiiamger, Beg, has criticized for [be increasing, labor rate. However, Bob thinks his decision is right. ' ‘ ' iii) The maintenance manager, Mark, feels that a saving. of ‘ £ 10,000 on fixed overhead has contributed profit to the company. Mark argues that the previous maintenance can make the machine operate well until next year. Therefore, maintenance cost for this year can be saved. ' ‘ I I i The variances for July are as follow. £ Material price - r 6,000 (F) Material usage 4,000 (A) Labor rate W 1,200 (A) Labor efficiency ' ' ' I 2,000 (1"). Labor idletime - ‘ _~ - . 600 (F) Variable overhead expenditure 12,000 (A) Variable overhead efficiency ' ‘ ' ‘ " - 5,500 (P) I. 7 Fixed overhead expenditure I 10,000 (F) Sales price p . 4,800 (A) Sales volume ' 2,100 (A) The variable overhead is absorbed by labor hours. Current month: August ' - _, Standard cost card—Model V68 - i I A Direct material , ' , 0.6 kg at £5 pier—kg ' “f ‘ ' * _' .,l 3,00; , Direct labor .‘ 1.5_ hours at. £4,perhour_ I I . ‘ .,‘Ih,6.00‘ variable overhead 1.5 hours at £ per hour 0.60 Fix'ed overhead 1.5 hours at 1‘2 3 per hour . m I Standard cost ‘ "14.10 Standard profit i r r . ‘ i w Standard selling price . ' r - l 21.00 ‘ Budgeted output for August was 6, 000 units. ‘ Actual results for August were as follow. ' A "Production of 5,700 units was. sold .for £ 118,200.._ .. . . . Material consumed in production, amounted to 2,400 kg at a total cost of £ 17,000. Labor hours paid for amounted to 9,000 hours 'at a cost‘of £ 32,000. ' Actual operating hours amounted to 8,500 hours. I ' 7 (Variable Overheads amounted to £ 14,000: ' ‘ Fixed overheads amounted to £ 35,000. Required a) I With the help of standard costing, assess the performances of: i) Purchasing [1W '- ' t ' a .- . . 7' i _ ‘ _ ‘ . (5 marks) ' ii) ‘ Production manager. '1 . i {'(3‘ marks) ' iii)’ Maintenance manager. : ; ' g i (2 marks) ‘ balculate all 'the variances and prepare an operating statement for August: reconciling" ' ' budgeted and actual profit. (12 marks) (Total‘: 22 marks) ...
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