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Preparing a detailed analysis of the variances

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Reference no: EM132769797

Question - Jacksons Ltd is a small manufacturing company producing and distributing leather products for industrial and retail customers. One of Jacksons' products is known as 'Product A'. The standard cost card of Jacksons Ltd for Product A is shown below.

Jacksons Ltd - Standard Cost Card

Product A (Currently attainable standards)

Description Quantities and prices Unit £

Direct materials 2.5 litres @ £4.00 per litre 10.00

Direct labour 1.5 hours @ £8.00 per hour 12.00

Fixed overhead £10.00 per unit produced 10.00

Standard total unit cost: 32.00

Standard selling price: 50.00

Standard unit gross profit: 18.00

Other information: The fixed overhead absorption rate is based on a consistent monthly production of 550 units.

Actual trading results for December 2020 are:

Jacksons Ltd

Actual Trading Results (December 2020)

£ £

Sales (for 550 units sold) 28,050

Direct materials (for 1513 kilos consumed) 5,294

Direct labour (1,100 hours recorded) 6,600

Fixed overhead (550 units produced) 4,950

Cost of sales: (16,844)

Gross profit: 11,206

Required -

1. Preparing a detailed analysis of the variances from standard that will reconcile expected (standard) and actual profits for the most recent trading period.

2. Explain the results of your detailed variance calculations and the possible causes for each variance.

Reference no: EM132769797

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