[SOLVED] Standard Cost Card | essaysclick

Standard Cost Card
Clinton Ltd is a small manufacturing company producing and distributing farming equipment and tools for agricultural and farming industries and customers. One of Clinton’s products is known as ‘Product A’. The standard cost card of Clinton’s Ltd for Product A is shown below.

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Clinton Ltd – Standard Cost CardProduct A(Currently attainable standards)
 
 
 
 
 
DescriptionQuantities and prices Unit£Direct materials
Direct labour
Fixed overhead 3.00 litres @ £2.50 per litre
1.50 hour @ £11.00 per hour
£12.00 per unit produced 7.50
16.50
12.0036.00
48.0012.00
Standard total unit cost: Standard selling price:Standard unit gross profit:
 
Other information:
The fixed overhead absorption rate is based on a consistent monthly production of 550 units.
 
Actual trading results for April 2022 are:
Actual Trading Results (April 2022)
£
£Sales (for 550 units sold)
Direct materials (for 1,925 litres consumed)
3,850 27,500Direct labour (1,100 hours recorded) 9,900Fixed overhead (550 units produced) 5,500Cost of sales: (19,250)Gross profit: 8,250
Clinton LtdRequired:
1. Prepare a detailed analysis of the variances from standard that will reconcile expected (standard) and actual profits for the most recent trading period. (Show all workings)
2. Explain the results of your detailed variance calculations and the possible causes for each variance.
Continued:
For the year ended 30th April 2022, Clinton’s business sales turnover was £132,800 producing a gross profit of £31,550 (gross profit margin = 23.76%)
Other relevant information:
Openinginventory£ Closinginventory£Direct materials 1,450 2,000Work-in-progress 3,000 3,500Finished goods 6,000 7,500
 
▪ The total cost of raw materials consumed was £11,450.
▪ The cost of direct labour was £50,000 and total production prime cost was £69,450 (after deducting direct expenses).
▪ Indirect production overheads were £26,000 and machinery depreciation was£7,800.
▪ Indirect non-production overheads, including £4,200 depreciation of office computers were £20,250.
Required:
3. Prepare the manufacturing account of Clinton Ltd for the year ended 30th April2022 (Show all workings).
 
4. Prepare the Income Statement of Clinton Ltd for the year ended 30th April 2022 to calculate ‘net operating profit’ and ‘net profit margin’. (Show all workings).
 
Continued:One of the products that Clinton Ltd manufactures is known as Product (B). Unit cost and revenue data for the product is provided below.
£Selling price 35.00Variable costs 14.00Contribution 21.00
Fixed costs are £66,500 per month.
Last month the business produced and sold 6,090 units. This activity level represents70% of current production capacity.
Required:5. Calculate:
a. The contribution / sales ratio (C/S %)
b. The product break-even point (in units and £s sales)
c. The level of sales (in units and £s) required to produce profits of £45,000
 
d. The current production capacity (in units)e. The margin of safety (in units and £s)
f. The total business profits if all spare capacity were to be sold for £15.15 per unit
 
Show all workings.ContinuedClinton Ltd is tendering for two contracts. Details of the contracts are shown below.
Contract Contract 1 Contract 2Units required 400 350Unit price (customer expected) £35.00 £40.00
You have examined the contracts and resource requirements and have established the following:
Contract
Prime cost resource requirements: Contract 1 Contract 2Direct materials (contract totals) Direct labourDirect expenses £1,300
90 hours
200 machine hours £2,000
150 hours
180 machine hours
Activity-based production overhead resource requirements:
Production runs 1.50 2Test events 30 50Materials movements 200 250
Other information:
▪ Direct labour is paid at £11.00 per hour.
▪ Direct expenses are calculated at £4.00 per machine hour.
▪ Activity-based production overhead resource requirements are calculated using the table provided below:
 
 
 
 
 
 
 
Activity cost pool Period Cost(£)Cost driver Driver volumeProduction scheduling and set – up Product testing (quality control) Raw materials handling DepreciationOther costs 2,40012,00045,00015,0005,600 Production runs Number of test events Materials movements Machine hoursLabour hours 2001,5004,5003,00080080,000
Total period production overheads:
 
Required:
6. Calculate the recovery rates for the production overheads of Clinton Ltd using theABC system.
7. Calculate the prime costs of the two contracts described.
8. Calculate the full production costs of the two contracts described based on ABCmethod.
 
Show all workings.Continued:
Clinton Ltd usually calculates selling prices by adding a 65% profit mark-up to total cost.
Required:
9. Explain, with reasons and appropriate workings, whether the contract tenders are likely to be successful (from a financial viewpoint only).
Continued:
Clinton Ltd is considering two capital investment opportunities, which will require the purchase of a new machinery, but only have the finance for one of them. The details relating to the investment projects are as follows:
Initial cost of machineProject A £150,000Project B £80,000
Both projects are estimated to last for four years, and the estimated disposal/residual values of the machines are as follow:
Residual asset valueProject A £9,000Project B £4,000
The estimated cash inflows are summarised in below:
Years Project A Project B£ £Year 1 35,000 23,000Year 2 40,000 23,000Year 3 55,000 23,000Year 4 60,000 23,000
Cost of capital is estimated at 8%.
Required:
10. By using the information given, compare these investment options based on‘Payback Period’ and ‘Net Present Value’ methods.
 
 
11. State, with reasons, which project you would recommend.
 
 
 
 
 
Present value table
Rate / 1% 2% 3%eriods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.8332 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.6943 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.5794 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.4825 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.4026 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.3357 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.2798 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.2339 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.19410 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.16211 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.13512 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.11213 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.09314 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.07815 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.06516 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.05417 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.04518 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.03819 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.03120 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026
P
Annuity table
Rate / Periods1%
2%
3%4%5%6%7%8%9%10%11%12%13%14%15%16%17%18%19%20%1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.8332 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.5283 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.1064 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.5895 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.9916 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.3267 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.6058 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.8379 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.03110 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.19211 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.32712 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.43913 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.53314 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.61115 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.67516 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.73017 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.77518 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.81219 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.84320 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870
Standard Cost Card Standard Cost Card Standard Cost Card Standard Cost Card

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