Carry pack Ltd manufactures and sells plastic cases for portable computers. Production each month equals sales orders received. The following monthly budget was prepared at the start of Year 6, to apply throughout the year:
|
|
Units |
£ |
£ |
|
Sales (@ £50 per unit): |
12,000 |
|
600,000 |
|
Production: |
12,000 |
|
|
|
Production costs: |
|
|
|
|
Direct materials |
|
132,000 |
|
|
Direct labour |
|
108,000 |
|
|
Variable overheads |
|
72,000 |
|
|
Fixed overheads |
|
48,000 |
|
|
|
|
|
360,000 |
|
Budgeted profit |
|
|
240,000 |
Further information
(a) Budgeted direct materials used per month were set at 26,400 kg.
(b) Budgeted direct labour hours per month were set at 36,000 hours.
The following actual report was produced for the month of April Year 6:
|
|
Units |
£ |
£ |
|
Sales (@ £50 per unit): |
12,300 |
|
615,000 |
|
Production: |
12,300 |
|
|
|
Production costs: |
|
|
|
|
Direct materials |
|
136,220 |
|
|
Direct labour |
|
129,200 |
|
|
Variable overheads |
|
72,200 |
|
|
Fixed overheads |
|
49,400 |
|
|
|
|
|
387,020 |
|
Actual profit |
|
|
227,980 |
Further information
(a) Actual direct materials used during April were 27,800 kg.
(b) Actual direct labour hours worked during April were 38,000 hours.
Required
(1) Prepare an explanation, using variances, of the difference between the budgeted profit and the actual profit for the month of April.
(2) Comment on possible causes for the variances you have calculated.