MANUEL S. ENVERGA UNIVERSITY FOUNDATION
Lucena City
COLLEGE OF BUSINESS and ACCOUNTANCY
Department of Accountancy
RESOURCE MATERIALS FOR PERFORMANCE MANAGEMENT SYSTEM (MAP102)
Cost, Variance and Variance Analysis
ILLUSTRATIVE PROBLEM
Given information about the operations of the company
Standard material price per kilo, P30.00
Standard material quantity per unit, 4 kilos
Standard material cost is ______________
Standard labor rate per hour, P40.00
Standard labor efficiency per unit, 2 hour
Standard labor cost is ________________
Actual material price per kilo, P 35.00
Actual material quantity per unit, 6 kilos
Actual material cost is ________________
Actual labor rate per hour, P 50.00
Actual labor efficiency per unit, 3 hours
Actual labor cost is __________________
Compute the material price and quantity
Factory Overhead variances
Factory overhead cost incurred by the company
Variable overhead cost, P 11,500
Fixed overhead cost, P 9,500
Actual Factory overhead is __________________
Actual units produced, 3,000 units
Compute for the labor rate and time variance
Standard hours allowed for the units, 2,000
Standard OH rate is P10
(Fixed, P4 Variable, P6)
Applied FAOH is ___________________
Compute for the total overhead variance___________________________________________
Two Variance Analysis Method
Overhead Budget Variance
Actual overhead cost……………………………………………………..P
Budgeted overhead cost for standard hours
Fixed overhead……………………………
P 9,500
Variable overhead(P6 x 3,000 units
18,000
_______
27,500
________
Overhead Budget Variance
P
Overhead Volume Variance
Budgeted overhead cost………………………………………………P 27,500
Standard overhead cost(applied)…………………………………
________
Overhead volume variance
P
Required: 1. Compute for the missing amount
2. What is the composition of the total factory overhead variance
3. Reasons for the variance