University of Cebu- Banilad Campus
COLLEGE OF BUSINESS AND ACCOUNTANCY
Banilad,Cebu City
ASSIGNMENT 01 STANDARD COSTING
Name: _Mainit, Mituzella Mhariel S._____ Schedule: _9:00-10:30 MW__ Course & Year: _BSA-3___ Date: __10/10/2022_
A. ABC Company manufactures special electrical equipment and parts. ABC uses stand d costs, with separate standards established for
each product. A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor
hours in this department, and a flexible budget system is used to plan and control department overhead. Standard costs for the special
transformer are determined annually in September for the coming year. The standard cost of a transformer for 2020 was P67.00:
Direct materials:
Iron
5 sheets @ P2.00 = P10.00
Copper
3 spools @ P3.00 =
9.00
Direct labor
4 hours @ P7.00 = 28.00
Variable overhead
4 hours @ P3.00 = 12.00
Fixed overhead
4 hours @ P2.00 =
8.00
Total
P 67.00
Overhead rates were based on normal and expected monthly labor hours for 2020, both of which were 4,000 direct labor hours. Practical
capacity for this department is 5,000 direct labor hours per month. Variable overhead costs are expected to vary with the number of
direct labor hours actually used.
During October 2020, 800 transformers were produced. This was below expectations because a work stoppage occurred during contract
negotiations with the labor force. Once the contract was settled, the department scheduled overtime in an attempt to catch up to expected
production levels. Actual costs incurred in October 2020 were as follows:
Direct materials
Purchased
Used
Iron
5,000 sheets @ P2.00 per sheet
3,900 sheets
Copper
2,200 spools @ P3.10
2,600 spools
Direct labor:
Regular time
2,000 hours @ P7.00
1,400 hours @ P7.20
Overtime
600 of the 1,400 hours were subject to overtime premium. The total
overtime premium of P2,160 is included in variable overhead in accordance with
corporate accounting practices.
Variable overhead
P10,000
Fixed overhead
P 8,800
Required: Compute the following variances: Materials price variances are isolated at the time of purchase.
a) Materials price variance: Iron ___0______________
b) Materials price variance: Copper __220_______________
c) Materials quantity variance: Iron _____200____________
d) Materials quantity variance: Copper ______600___________
e) Labor rate variance: ___280______________
f) Labor efficiency variance: ___1,400______________
g) Variable overhead spending variance: ___200______________
h) Variable overhead efficiency variance: ___600______________
i) Fixed overhead budget variance: ___800______________
j) Fixed overhead volume variance: ____1,600_____________
B. At the beginning of 2020, ABC Company adopted the following standards:
Direct material (3 pounds @ P2.50 per pound)
P7.50
Direct labor (5 hours 0 P7.50 per hour)
37.50
Factory overhead:
Variable (P3.00 per direct labor hour)
15.00
Fixed (P4.00 per direct labor hour)
20.00
Standard cost per unit
P80.00
Normal volume per month is 40,000 direct labor hours. ABC’s January 19x4 budget was based on normal volume. During January,
ABC produced 7,800 units, with records indicating the following:
Direct material purchased
25,000 pounds 0 P2.60
Direct material used
23,100 pounds
Direct labor
40,100 hours @ P7.30
Factory overhead
P300,000
Required:
a) Prepare a flexible budget for January 19x4 production costs, based on actual production of 7,800 units.
b) For the month of January 19x4, compute the following variances, indicating whether each is favorable or unfavorable:
i.
Direct materials price variance, based on purchases _________________
ii.
Direct materials usage variance _________________
iii.
Direct labor rate variance _________________
iv.
Direct labor efficiency variance _________________
v.
Factory overhead spending variance _________________
vi.
Variable factory overhead efficiency variance _________________
vii.
Factory overhead volume variance _________________
—End of Examination—
Page 1 of 1