Business, 30.04.2021 02:50 kataldaine

Soak plc. commenced operations four years ago after its founding directors spotted a niche in the market for a special type of “sports gel” which is used to treat athletes injuries. The gel is sold in plastic bottles and is expected to retail at €25 per bottle. Soak plc. uses a marginal costing system to report its profits and value its production. The management accountant is currently comparing its actual and budgeted operating results for the month of February 2021. The management accountant provided the following information:
1. Soak plc. budgeted to produce and sell 10,000 bottles of gel during February.

2. According to budget, each bottle of gel produced required 1.5 litres of aloe vera concentrate and one bottle. The company agreed with the suppliers to purchase the aloe vera concentrate for €8 per litre and the bottle for €2 per bottle.

3. The mixing and pouring of the gel was expected to take 0.5 hour per bottle. The workforce consisted of both skilled and unskilled labourers and an average direct labour cost of €10.20 per hour was expected. Variable overheads were budgeted at €6 per labour hour.
At the end of February, management were disappointed to report that it produced and sold only 9,700 bottles of gel. However, the actual selling price per bottle was €7.5 higher than expected. Each bottle of gel used 1.80 litres of aloe vera, costing €8.30 per litre, and each bottle cost €1.90. Due to unexpected delays, each bottle of gel took 0.45 hours to mix and 0.30 hours to pour, costing €83,662. Variable production overheads were €58,750. You are required to:

(a) Prepare a statement showing the budgeted contribution and the actual contribution for February. (8 Marks) (b) Calculate the following variances: 1. Sales price; 2. Sales volume; 3. Materials usage; 4. Materials price; 5. Labour efficiency; 6. Labour rate; 7. Variable overhead efficiency; 8. Variable overhead rate. (24 Marks)
(c )Outline eight key factors that Soak plc. should consider before deciding whether a variance should be investigated. (8 Marks) Total (100 Marks)

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Soak plc. commenced operations four years ago after its founding directors spotted a niche in the ma...