Exercise 7.

6: Mowbray Ltd

Budgeted Income Statement

less
Sales   24000 (1200*20)
Expenses  
Materials 9000 (3600*2,5)
Labour 2700 (300*9)
Fixed overheads 4320 (1200*3,6)
    16020  
PROFIT:   7980  

Actual Income Statement

less
Sales   18000  
Expenses  
Materials 7400  
Labour 2300  
Fixed overheds 4100  
    13800  
PROFIT:   4200  

Reconcilation

Budgeted profit 7980

 ADD Favorable variances  
Material quantity variance 2000
Labour efficency v. 405
Fixed overheads 220 (4320-
4100)
  2625
LESS Unfavorable variances -
Matrial price variance 400
Labour rate variance 5
Sales price variance 6000
  -6405
ACTUAL PROFIT: 4200

Standard 1 unit Standard 1200 units   Actual 1200 units

qty/hr price/rate AMOUNT qty/hr price/rat AMOUNT qty/hr price/rat AMOUNT
e e
3 2,5 7,5 3600 2,5 9000 2800 2,64 7400 material
0,25 9 2,25 300 9 2700 255 9,02 2300 labour
1 20 20 1200 20 24000 1200 15 18000 sales

Material price variance: 400 unfavorable Material quantity variance: 2000 favorable
(standard price-actual price)*actual quantity (stand q.-act.q)*standard price
(2,5-2.64)*2800 (3600-2800)*2.5

Labor rate variance: 5 unfavorable Labor efficiency variance: 405 favorable

(standard rate-actual rate)*actual hours (standard hrs-actual hrs)*standard rate
(9-9,02)*255 (300-255)*9

Sales price varaince: 6000 unfavorable

(standard price - actual price)*actual
quantity
(20-15)*1200