Reference no: EM13878741

Trimtone Limited' is a company that manufactures the Trimouse. At the start of the year the budgeted costs per unit of the Trimouse were as follows:

Direct costs

Direct material: 4.5 kg at £12 per kg

Direct labour: Skilled: 3 hours at £14 per hour

Fixed overheads: Overheads are budgeted to be £47,250 per annum

Overheads are absorbed on a basis of total labour hours Budgeted production: 1,500 units

During the period the following costs were actually incurred:

Direct materials: 7,100 kilograms were used, costing £74,550 in total Skilled labour: 4,275 hours worked at a total cost of £70,110

Fixed overheads: Overheads incurred were £52,025 Actual production: 1,450 units

The production manager has expressed concern that the total costs seem to be running at too high a level against budgeted costs forecast at the start of the year. You work in the finance department, and the production manager has approached you to see if you can analyse the causes of the problem.

(a) Calculate the budgeted standard cost of one Trimouse.

(b) Prepare a statement analysing the high level of costs that are worrying the production manager using appropriate materials, labour and overhead variances.

(c) Making use of your results in (b) interpret for management the key features of the firm's performance.