Assessment 2 Task 1.3

sophie_612

Hi,

Can someone tell me how i would know the answer to the highlighted parts the rest i know just confused on those couple of things.

Thanks
Sophie

CornishPixie

You need to start with your standard costs. Once you've got those, this is very straightforward, so working out your standard costs should be your first point of call.

That will leave you with 2kg x £3.50 = £7, 0.5hrs x 10£ = £% and 0.5 x 2 = 1. That gives a total of £13. So your standard marginal cost of production will be £13 x 3200 = 41,600

Variable overhead rate = 1920 x 2 - 3456 = 384 (favourable)

Variable overhead efficiency will be (0.5 x 3200 x 2) - (1920 x 2) = -640 (so adverse)

Hope that helps.

sophie_612

CornishPixie said:

You need to start with your standard costs. Once you've got those, this is very straightforward, so working out your standard costs should be your first point of call.

That will leave you with 2kg x £3.50 = £7, 0.5hrs x 10£ = £% and 0.5 x 2 = 1. That gives a total of £13. So your standard marginal cost of production will be £13 x 3200 = 41,600

Variable overhead rate = 1920 x 2 - 3456 = 384 (favourable)

Variable overhead efficiency will be (0.5 x 3200 x 2) - (1920 x 2) = -640 (so adverse)

Hope that helps.

thanks @CornishPixie when you say start with your standards costs what would i have to do?

CornishPixie

Ok, so looking at your budgeted quantity columns - these form the basis of the standard costs!

Materials - 21,000 / 6,000 = £3.50/kg and per unit will be 6,000 / 3,000 = 2kg/unit
Labour - 15,000 / 1,500 = £10/hour and per unit will be 1,500 / 3,000 = 0.5/unit
Var o'heads - 3,000 / 1,500 = £2/hour and per unit will be 1,500 / 3,000 = 0.5 OAR

So, going back to my answer above, to make 1 unit will be (2kg x £3.50) = £7, plus (0.5hour x £10) = £5 plus (0.5 x 2) = £1 giving a total of £13 per unit. multiplied by the actual number of units made gives you £13 x 3200 = £41,600

sophie_612

@CornishPixie thank you for your help

CornishPixie

You are welcome.