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    Standard Costing - A Level

    Uploaded by

    MUSTHARI KHAN
    The document provides a budgeted marginal costing income statement and additional information for Max Ltd. It asks to calculate absorption costing rates, explain absorption costing stages, identify arguments for marginal costing, and calculate various variances based on actual results provided.

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    Download as DOCX, PDF, TXT or read online from Scribd

    Standard Costing - A Level

    Uploaded by

    MUSTHARI KHAN
    46 views3 pages
    The document provides a budgeted marginal costing income statement and additional information for Max Ltd. It asks to calculate absorption costing rates, explain absorption costing stages, identify arguments for marginal costing, and calculate various variances based on actual results provided.

    Original Title

    STANDARD COSTING -----A LEVEL

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    The document provides a budgeted marginal costing income statement and additional information for Max Ltd. It asks to calculate absorption costing rates, explain absorption costing stages, identify arguments for marginal costing, and calculate various variances based on actual results provided.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    46 views3 pages

    Standard Costing - A Level

    Uploaded by

    MUSTHARI KHAN
    The document provides a budgeted marginal costing income statement and additional information for Max Ltd. It asks to calculate absorption costing rates, explain absorption costing stages, identify arguments for marginal costing, and calculate various variances based on actual results provided.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 3

    ANSWER THE FOLLOWING

    1.Max Ltd is a small business, which has the following budgeted marginal costing Income statement for the
    month ended 30 April 2023:

    $ ’000 $ ’000

    Sales 4,800
    Cost of sales:
    Opening inventory 300
    Production costs 4,000
    Closing inventory (1,100) 3,200

    Other variable costs:


    Selling 320

    (3,520)

    Contribution 1,280

    Fixed costs:
    Production overheads 400
    Administration 360
    Selling 120 (880)

    Profit for the year 400

    The additional information provided is as follows:

    1. The standard cost per unit is: $

    Direct materials (1 kg) 800


    Direct labour (3 hours) 900
    Variable Production overheads (3 hours) 300

    2,000

    2. Budgeted selling price per unit $ 3,000

    3. The normal level of activity is 2,000 units per month. Fixed production costs are budgeted at $ 400,000
    per month absorbed on the basis of direct labour hours.

    4. The actual results for the month of April 2023 were as follows:

     Sales (1,700 units) at $ 3,200 per unit $ 5,440,000


     Total direct material cost at $ 700 per Kg $ 1,260,000
     Total direct labour cost at $ 400 per hour $ 2,040,000
     Total variable production overhead cost at $ 110 per hour $ 561,000
     Total variable selling overheads $ 391,000

    Required:

    (a) Calculate the budgeted fixed production overhead absorption rate and the standard production cost per
    unit based on absorption costing.

    (b) Explain the three (3) stages of the absorption costing system.

    (c) Identify any two (2) arguments in favour of the use of marginal costing.
    (d) Calculate the following variances for the month of April 2023:

    (i) Sales price variance

    (ii) Sales volume profit variance

    (iii) Direct material price variance

    (iv) Direct material usage variance

    (v) Direct labour rate variance

    (vi) Direct labour usage variance

    (vii) Variable production expenditure variance

    (viii) Variable production efficiency variance

    (e) Outline any three (3) possible causes of the material usage variance as calculated in (d) (iv) above.

    MARKING SCHEME

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