problem 1: Sun Ltd has budgeted to produce 5000 units of Beam per month. On this basis the standard cost per Beam is set as shown:
Direct Materials 50 kilos at Rs 0.18 per kilo
Direct Labor 45 minutes at Rs 1.60 per hour
Fixed Overheads Rs 0.80 per unit
For the month of May the actual production was 4800 Beams and the actual costs incurred for the month were:
Direct Materials 241 000 kilos at a total cost of Rs 43 300
Direct Labor 3400 hours at a cost of Rs 5 500
Fixed Overheads incurred Rs 4 140
Mr. Ray, the Management Accountant, has asked you to compute the Material, Labor and Fixed Overheads variances for the month, in brief giving two reasons for each variance.
problem 2: The launch of a new product is being considered and four possible output levels are being considered depending on consumer reaction. The variable costs related with such levels are shown below:
Consumer reaction Adverse Average Good Excellent
Variable costs (Rs 000`s) 20 30 45 70
There are fixed costs of Rs 36,000 and the C/S ratio is expected to be 60%.
a) Compute the profit and loss at each of the four levels.
b) Compute the break even in sales value.
c) Compute the level of sales at which a profit of Rs 10,000 would be made.