Standard Costing and Variance Analysis
Assignment 3
1.
The WMSU Company has made the following information available for its production facility for June 2021. Fixed overhead
was estimated at 19,000 machine hours for the production cycle. Actual machine hours for the period were 18,900, which
generated 3,900 units.
Material purchased (80,000 pieces)
Material quantity variance
Machine hours used (18,900 hours)
VOH spending variance
Actual fixed overhead
Actual labor cost
Actual labor hours
P314,000
P6,400 U
P50 U
P60,000
P40,120
5,900
WMSU’s standard costs are as follows:
Direct material
Direct labor
Variable overhead
(applied on a machine hour basis)
Fixed overhead
(applied on a machine hour basis)
20 pieces @ P4 per piece
1.5 hours @ P6 per hour
4.8 hours @ P2.50 per hour
4.8 hours @ P3 per hour
Determine the following items:
a.
material purchase price variance P6,000 F
b.
standard quantity allowed for material 78,000 SHA
c.
total standard cost of material allowed P312,000
d.
actual quantity of material used P318,400
e.
labor rate variance P 4,720 U
f.
standard hours allowed for labor 5,850 SHA
g.
total standard cost of labor allowed P35,100
h.
labor efficiency variance P300 U
i.
actual variable overhead incurred P47,300
j.
standard machine hours allowed 18,720 MHA
k.
variable overhead efficiency variance P450U
l.
budgeted fixed overhead P57,000
m.
applied fixed overhead P56,160
n.
fixed overhead spending variance P3,000 U
o.
volume variance P 840U
p.
total overhead variance P4,340U
2.
A company uses a standard cost system to account for its only product. The materials standard per unit was 4 lbs. at P5.10
per lb. Operating data for April were as follows:
Material used ................................................................................................................
Cost of material used ....................................................................................................
Number of finished units produced ..............................................................................
The material usage variance for April was: P1,020 F
3.
7,800 lbs.
P40,950
2,000
William Company uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material
in inventory were purchased for P105,000, and two units of raw material are required to produce one unit of final product.
In November, the company produced 12,000 units of product. The standard allowed for material was P60,000, and there
was an unfavorable quantity variance of P2,500. The materials price variance for the units used in November was P12,500 U
1
4.
Information on Satina Company’s direct material costs is as follows:
Standard unit price
P 3.60
Actual quantity purchased
1,600
Standard quantity allowed for actual production
1,450
Materials purchase price variance – favorable
P 240
What was the actual purchase price per unit, rounded to the nearest centavos? P3.45
5.
The standard hourly rate was P4.10. Standard hours for the level of production are 4,000. The actual rate was P4.27. The labor
rate variance was P654.50, unfavorable. What were the actual labor hours? 3,850
6.
Habbi Company’s operations for the month just ended originally set up a 60,000 direct labor hour level, with budgeted direct
labor of P960,000 and budgeted variable overhead of P240,000. The actual results revealed that direct labor incurred
amounted to P1,148,000 and that the unfavorable variable overhead variance was P40,000. Labor trouble caused an
unfavorable labor efficiency variance of P120,000, and new employees hired at higher rates resulted in an actual average wage
rate of P16.40 per hour. The total number of standard direct labor hours allowed for the actual units produced is P62,500
7.
Christian Company has a standard absorption and flexible budgeting system and uses a two-way analysis of overhead
variances. Selected data for the June production activity are:
Budgeted fixed factory overhead costs
P 64,000
Actual factory overhead
230,000
Variable factory overhead rater per DLH
P
5
Standard DLH
32,000
Actual DLH
32,000
The budget (controllable) variance for June is P6,000 unfavorable
8.
The standard factory overhead rate is P10 per direct labor hour (P8 for variable factory overhead and P2 for fixed factory
overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for
the production of 5,000 units during May were as follows:
Standard: 25,000 hours at P10
P250,000
Actual:
Variable factory overhead
202,500
Fixed factory overhead
60,000
What is the amount of the factory overhead volume variance? 10,000 unfavorable
9.
Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were budgeted. If the fixed overhead
volume variance was P12,000 favorable and the fixed overhead spending variance was P16,000 unfavorable, fixed
manufacturing overhead applied must be: P512,000
10. Define and describe the following:
a.
b.
e.
Management by exception
Causes of –
1. Materials price variance
2. Materials quantity or usage variance
3. Labor rate variance
4. Labor efficiency variance
5. Controllable variance
6. Variable overhead efficiency variance
7. Capacity or volume variance
c. Limitations of Standard Cost
d. Benefits of Standard Costs
Users of Standards Costs
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