The following report has been prepared for the production department of Cabinets Ltd in respect of the month of May Year 4:
|
|
Actual costs or quantities recorded |
Variance £ |
|
Direct materials price |
£2.80 per kg |
2,240 favourable |
|
Direct materials usage |
11,200 kg |
4,800 adverse |
|
Direct labour rate |
£9 per hour |
5,600 adverse |
|
Direct labour efficiency |
3.5 hours per unit |
6,400 adverse |
|
Fixed overhead expenditure |
£39,000 |
3,000 adverse |
The department manufactures storage cabinets. When the budget was prepared, it was expected that 1,800 units would be produced in the month but, due to a machine breakdown, only 1,600 units were produced.
Required
(a) Reconstruct the original budget, giving as much information as may be derived from the data presented above.
(b) Provide an interpretation of the performance of the production department during the month of May Year 4.