management acounting Essay example
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Finance & Accounting
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Name Tutor Institution Subject code Date of submission Operating Statement for last month Workings W1. Unit gross profit 15.00 – 6.39 = 8.61 Budgeted gross profit = 2130 x 8.61 = 18339.30 W2. Sales volume profit variance = (2,130 – 2,100) ?8.61 =?258.3 (A) W3…

Introduction

220.5 (A) W7. Material M7 usage variance = ((2,100 ?0.68) – 1,470) ?1.75 =?73.5 (A) W8. Direct labour rate variance = (7.2 ?525) – 3,675 =?105.0 (F) W9. Direct labour efficiency variance = ((2,100 ?14/60) – 525) ? 7.2 =?252.0 (A) W10. Variable overhead expenditure variance = (2.1 ?525) – 1,260 =?157.5 (A) W11. Variable overhead efficiency variance = ((2,100 ? 14/60) – 525) ? 2.1 =?73.5 (A) Budgeted fixed production overhead = 497 ? 9= ?4,473 W12 Fixed production overhead expenditure variance = 4,473 – 4,725 = ?252.0 (A) Standard hours for actual production = 2,100 ?14/60 = 490 hours W13 Fixed production overhead efficiency variance = (490 – 525) ? 9 = ?315 (A) Fixed production overhead capacity variance = (497 – 525) ?9 = ?252 (F) b) Discuss how the operating statement can assist managers in (1) Controlling variable cost Variable cost refers to operating expenses that vary in ratio to the business activity. Examples of variable cost include in our case include Direct material, direct labor and variable production overhead. Operating statement does assist managers in controlling variable cost in the following ways. Measuring actual cost marks the beginning of controlling cost. This is followed by variance calculation that is meant to show the difference actual and budgeted/standard costs. ...
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