Wham Berhad operates a standard costing system and analysis of variances is made every month. The standard cost card is as follows for a unit of product: RM Direct materials

Wham Berhad operates a standard costing system and analysis of variances is made every month. The standard cost card is as follows for a unit of product: RM Direct materials                      0.5kg at RM 4/kg                     2.00 Direct labour                        2 hours at RM 2/hour                 4.00 Variable overheads             2 hours at RM 0.30/hour            0.60 Fixed overhead                  2 hours at RM 3.70/hour              7.40 Standard cost                                                                          14.00 Standard profit                                                                         6.00 Standard selling price                                                            20.00 Budgeted output for the month of January 2021 was 5,100 units. Actual results were as follows: Production of 4,850 units were sold for RM95,600 Materials consumed in production amounted to 2,300 kgs at a total cost of RM9,800 Labour hours paid amounted to 8,500 hours at a cost of RM16,800 Actual hours worked amounted to 8,000 hours Variable overheads amounted to RM2,600 Fixed overheads amounted to RM42,300 Required: a. Calculate ALL variances and prepare and operating statement for the month ending 31 January 2021. b. Critically evaluate the importance of setting standards in management accounting.

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