Assignment 2 – 2 marks

Q1. The following are details related to a product.

Standard data per unit of Product Q is as follows:
The budgeted production and sales volume for Product Q was 12,000 units. Budget for 2,400 direct
labour hours (12,000 units):
i. 5 units to be produced per hour
ii. Standard labour cost is Rs.3.20 per hour
iii. Standard material cost is Rs.1.50 per kilogram and each unit requires 2 kilos
iv. Budgeted fixed overheads Rs.2,400
v. Budgeted variable overhead cost per direct labour hour = Rs.0.80.

Actual results for the same period:

 11,500 units were manufactured.
 2,320 direct labour hours were worked, and cost Rs.7,540
 25,000 kilos of direct material were purchased (and used) at a cost of Rs.1.48 per kilogram.
Other information:
 Inventory is valued at standard cost of production.
 Actual variable overheads were Rs.1,750
 Actual fixed overheads were Rs.2,462
 10,000 units were sold for Rs.62,600.

Required
Prepare operating statements for the period using:
(a) standard absorption costing and
(b) standard marginal costing.
To prepare the absorption costing operating statement, you should show the variable overhead
expenditure and efficiency variances, and the fixed overhead expenditure and volume variances.