calculation of actual quantities working backwards from variances 611430

Calculation of actual quantities working backwards from variances

The following profit reconciliation statement summarizes the performance of one of SEWs products for March.

(£)
Budgeted profit	4250
Sales volume variance	850A
Standard profit on actual sales	3400
Selling price variance	4000A
	(600)

Cost variances:	Adverse	Favourable
Direct material price		1000
Direct material usage	150
Direct labour rate	200
Direct labour efficiency	150
Variable overhead expenditure	600
Variable overhead efficiency	75
Fixed overhead efficiency		2500
Fixed overhead volume		150
Actual profit	1175	3650	2475F
			1875

The budget for the same period contained the following data:

Sales volume		1500 units
Sales revenue	£20 000
Production volume		1500 units
Direct materials purchased		750 kg
Direct material used		750 kg
Direct material cost	£4 500
Direct labour hours		1125
Direct labour cost	£4 500
Variable overhead cost	£2 250
Fixed overhead cost	£4 500

Additional information:

• Stocks of raw materials and finished goods are valued at standard cost.
• During the month the actual number of units produced was 1550.
• The actual sales revenue was £12 000.
• The direct materials purchased were 1000 kg.

Requited:

(a) Calculate

(i) The actual sales volume;

(ii) The actual quantity of materials used;

(iii) The actual direct material cost;

(iv) The actual direct labour hours;

(v) The actual direct labour cost;

(vi) The actual variable overhead cost;

(vii) The actual fixed overhead cost.

(b) Explain the possible causes of the direct materials usage variance, direct labour rate variance and sales volume variance.