Preparation of a standard cost operating statement Example 16.3 gave some information relating to the Frost Production Company Limited for the year to 31 March 2016. The cost data used in that example will now be used to illustrate the structure of a standard cost operating statement, along with

Question

Preparation of a standard cost operating statement

Example 16.3 gave some information relating to the Frost Production Company Limited for the year to 31 March 2016. The cost data used in that example will now be used to illustrate the structure of a standard cost operating statement, along with some additional information.

Additional information:

1 Assume that the budgeted sales were 100 units at a selling price of £150 per unit.

2 90 units were sold at £160 per unit.

Required

Prepare a standard cost operating statement for the year to 31 March 2016.

Accepted Answer

Frost Production Company Limited. Standard cost operating statement for the year to 31 March 2016:

			£
Budgeted sales (100 × £150)			15000
Budgeted cost of sales (100 × £100)			[latex]\underline{10000}[/latex]
Budgeted profit			5000
Sales volume profit variance (1)			[latex]\underline{(500)}[/latex]
Budgeted profit from actual sales			4500
Variances: (2)	(F)	(A)
	£	£
Sales price (3)	900
Direct materials usage		100
Direct materials price	700
Direct labour efficiency	400
Direct labour rate		800
Variable overhead efficiency	100
Variable overhead expenditure		200
Fixed overhead volume		200
Fixed overhead expenditure	[latex]\underline{400}[/latex]	____
	[latex]\underline{\underline{2500} }[/latex]	[latex]\underline{\underline{1300} }[/latex]	[latex]\underline{1200}[/latex]
Actual profit	[latex]\underline{\underline{5700} }[/latex]

1 Sales volume profit variance = (actual quantity - budgeted quantity) × standard profit per unit

= (90 - 100) × £50 = [latex]\underline{£500 (A)}[/latex]

2 Details of the cost variances were shown in the answer to Example 16.3.

3 Selling price variance = (actual selling price per unit - standard selling price per unit) × actual sales quantity

= (£160 - £150) × 90 = [latex]\underline{£900 (F)}[/latex]

Question 16.5: Preparation of a standard cost operating statement Example 1...

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