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Charles Cameron Managing Director of the Ultra Mix Company is concerned

 
Charles Cameron, Managing Director of the Ultra Mix Company is concerned about the company’s pricing policy, labour costs and material usage. He has asked you to look at one of the company’s products, the Colate, to see if there is a need for an investigation over any or all of his concerns.
 
The company uses a standard marginal costing system.
 
The standard cost card for the Colate is as follows:
 
Item £
 
Direct material A 10kg @ £5/kg 50
 
Direct material B 30kg @ £4/kg 120
 
Direct labour 12hours @ £8/hour 96
 
Variable cost per unit 266
 
Budgeted selling price 350
 
Contribution 84
 
The budgeted fixed cost is £19,200 and the budgetedvolume is 800 units of Colate.
 
The actual results for last year were:
 
Sales revenue 830 units of Colate sold for £288,840
 
Direct material A 7,470kg used at a cost of £36,603
 
Direct material B 26,560kg used at a cost of £103,584
 
Direct labour 10,790 hours used at a cost of £87,399
 
Fixed overhead £19,400
 
Required
 
(a) Produce a flexible budget statement and include the sales volume contribution variance in a foot note to your flexed budget statement.
 
(b) Calculate price and quantity variances for both materials and labour.
 
(c) Comment on the concerns of the managing director in the light of your analysis.

May 10 2018 Read more Less More

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