Math Problem Solver

Problem Statement:

Granger plc, a stove manufacturer, has provided the following data for the month of March:

Budgeted Output: 400 stoves

Actual Output: 350 stoves

Standard Selling Price: €600/stove

Standard Costs per Stove:

Direct Labor: 10 hours * €15/hour = €150

Direct Materials: 60 kg * €3/kg = €180

Fixed Overhead: €70

Actual Costs:

Direct Labor: 4000 hours * €15.75/hour = €63,000

Direct Materials: 18,000 kg * €4/kg = €72,000

Fixed Overhead: €30,000

Budgeted Fixed Overhead: €28,000

We are required to calculate the variances for March and reconcile the budgeted and actual profit figures.

Calculation of Variances:

1. Sales Variances:

Sales Price Variance:

Actual Sales Revenue - (Actual Units Sold * Standard Selling Price)

= €227,500 - (350 * €600) = €12,500 Adverse

Sales Volume Variance:

(Actual Units Sold - Budgeted Units Sold) * Standard Selling Price

= (350 - 400) * €600 = €30,000 Adverse

2. Direct Material Variances:

Direct Material Price Variance:

Actual Quantity Purchased * (Actual Price - Standard Price)

= 18,000 kg * (€4 - €3) = €18,000 Adverse

Direct Material Usage Variance:

Standard Price * (Actual Quantity Used - Standard Quantity Allowed)

= €3/kg * (18,000 kg - (350 stoves * 60 kg/stove)) = €9,000 Adverse

3. Direct Labor Variances:

Direct Labor Rate Variance:

Actual Hours Worked * (Actual Rate - Standard Rate)

= 4000 hours * (€15.75 - €15) = €3,000 Adverse

Direct Labor Efficiency Variance:

Standard Rate * (Actual Hours Worked - Standard Hours Allowed)

= €15/hour * (4000 hours - (350 stoves * 10 hours/stove)) = €7,500 Adverse

4. Fixed Overhead Volume Variance:

Budgeted Fixed Overhead - (Budgeted Fixed Overhead Rate * Actual Output)

= €28,000 - (€70/stove * 350 stoves) = €7,000 Favorable

Reconciliation of Budgeted and Actual Profit:

Budgeted Profit:

400 stoves * €200/stove = €80,000

Actual Profit:

€227,500 (Sales Revenue) - €63,000 (Direct Labor) - €72,000 (Direct Materials) - €30,000 (Fixed Overhead) = €62,500

Reconciliation:

Budgeted Profit: €80,000

Sales Price Variance: (€12,500)

Sales Volume Variance: (€30,000)

Direct Material Price Variance: (€18,000)

Direct Material Usage Variance: (€9,000)

Direct Labor Rate Variance: (€3,000)

Direct Labor Efficiency Variance: (€7,500)

Fixed Overhead Volume Variance: €7,000 = Actual Profit: €62,500