Question:
Accounting entries for a standard costing system
Bronte Ltd manufactures a single product, a laminated kitchen unit with a standard cost of £80 made up as follows;
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(£)
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Direct materials (15 sq. metres at £3 per sq. metre)
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45
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Direct labour (5 hours at £4 per hour)
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20
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Variable overheads (5 hours at £2 per hour)
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10
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Fixed overheads (5 hours at £1 per hour)
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5
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80
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The standard selling price of the kitchen unit is £100. The monthly budget projects production and sales of 1000 units. Actual figures for the month of April are as follows:
Sales 1200 units at £102
Production 1400 units
Direct materials 22 000 sq. metres at £4 per sq. metre
Direct wages 6800 hours at £5
Fixed overheads £6000
You are required to prepare:
(a) A trading account reconciling actual and budgeted profit and showing all the appropriate variances
(b) Ledger account in respect of the above transactions.
(* The original examination question did not include part (b).)