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Standard Costing: Tense-R-Us

View Solution # 27177

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QUESTION 1

The management of TENSE-R-US are currently in union negotiations regarding workers pay in the machine shop and are also expecting a delayed delivery of high-tensile steel that is desperately required for continued production. They have been contacted to quote for a particular one-off job to produce lO identical castings for a prospective new customer. The job will require the following :

JOB NUMBER: 12345   10 CASTINGS       STANDARD COSTS
MATERIALS: 55 kgs of ordinary steel @ £3.00 per kg.
                       20 kgs of high-tensile steel @ £1 0.00 per kg.
LABOUR:      10 hours foundry-workers's wages @ £6.00 per hour
                       25 hours in the machine shop worker's wages @ £8.00 per hour
OVERHEADS: £245.00

The customer agreed to have the job done by Tense-R-Us and when the job was finished, Tense-R-Us found that the actual results were:

JOB NUMBER: 12345   10 CASTINGS        STANDARD COSTS
MATERIALS: 60 kgs of ordinary steel @ £3.00 per kg.
                        20 kgs of high-tensile steel @ £12.00 per kg.
LABOUR:       12 hours foundry-workers's wages @ £6.00 per hour
                        25 hours in the machine shop worker's wages @ £8.00 per hour
OVERHEADS: £245.00
(a) What is the standard cost of the job?
(b) What is the actual cost of the job?
(c) Analyse the variances that have occurred.

QUESTION 2

Based on the standard costs, a price was quoted to the customer to give Tense-R-Us an expected profit margin of 25%.
(a) What was the value (selling price) of the original quote?
(b) What will be the actual profit eamed?

QUESTION 3

The machine shop workers were awarded a £ 1 per hour pay rise to be backdated to a date that included JOB 12345.
(a) How does this affect your costings?
(b) How does this affect your profit?

Solution

Standard Costing calculations are shown in detail. Proper explanations are provided in the solution for variances of budgeted and actual figures. Detailed calculations are provided for the 2nd and 3rd problems.

No. of Words: 357 words Help

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Standard Costing: Tense-R-Us

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