Company ABC has suffered severe losses over the years. This situation has arisen partially because of bad industrial relations and poor management control. An extract from the standard cost system report relating to the first 3-month period reveals:
Budged fixed overhead | $800,000 |
Budgeted ouput | 800,000 units |
Standard time per unit | 15 minutes |
Actual hours worked | 192,000 |
Actual output | 720,000 units |
Actual fixed overhead | $804,000 |
Required:
(a) Calculate 3 variances from the extract given ( including the total variances) (12 marks)
(b) Discuss the meaning of the 3 variances explaining how poor morale and management show themselves in reported variances (8 marks)
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FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four,Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.Also author to another very popular free educational accounting cum finance blog:http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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