- 15 Marks
MA – L2 – Q24 – Standard costing and variance analysis
Calculate sales price variance for three products using actual and standard selling prices for TRK Limited.
Question
TRK Limited operates an absorption costing system and sells three products, B, R, and K, which are substitutes for each other. The following standard selling price and cost data relate to these three products:
| Product | Selling price per unit | Direct material per unit | Direct labour per unit |
|---|---|---|---|
| B | GH₵14.00 | 3.00 kg at GH₵1.80 per kg | 0.5 hrs at GH₵6.50 per hour |
| R | GH₵15.00 | 1.25 kg at GH₵3.28 per kg | 0.8 hrs at GH₵6.50 per hour |
| K | GH₵18.00 | 1.94 kg at GH₵2.50 per kg | 0.7 hrs at GH₵6.50 per hour |
Budgeted fixed production overhead for the last period was GH₵81,000. This was absorbed on a machine hour basis. The standard machine hours for each product and the budgeted levels of production and sales for each product for the last period are as follows:
| Product | B | R | K |
|---|---|---|---|
| Standard machine hours per unit | 0.3 hrs | 0.6 hrs | 0.8 hrs |
| Budgeted production and sales (units) | 10,000 | 13,000 | 9,000 |
Actual volumes and selling prices for the three products in the last period were as follows:
| Product | B | R | K |
|---|---|---|---|
| Actual selling price per unit | GH₵14.50 | GH₵15.50 | GH₵19.00 |
| Actual production and sales (units) | 9,500 | 13,500 | 8,500 |
Required:
(a) Calculate the sales price variance for overall sales for the last period. (b) Calculate the sales volume profit variance for overall sales for the last period.
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