Reference no: EM133134075

Question - Newgate Limited manufactures Product A and the standard cost is as follows:

		$
Selling price		52.00
Direct materials	0.5 kg @ $8/kilo	4.00
Direct labour	2 hours @ $10/hour	20.00
Variable overheads	2 labour hours @ 60c/hour	1.20
Fixed overheads	2 hours @ $7.40/hour	14.80
Standard cost		40.00
Standard profit		12.00

Other information is as follows:

1. Budgeted output for the month of February was 5,100 units.

2. Production of 4,850 units was sold for $232,800.

3. Materials consumed were 2,300 kg costing $19,600.

4. Labour hours were 8,000 hours costing $84,000.

5. Variable overheads cost $5,200.

6. Fixed overheads cost $84,600.

Required -

1. Calculate two variances for each cost except fixed overheads (just one variance), using the contribution approach and make an operating statement for the month of February, reconciling the actual and the budgeted profit figures.

2. Make a brief report for the general manager of Newgate Limited commenting on the performance of the company in February, suggesting possible causes for significant variances.