PROFESSIONAL PROGRAM – Page 90

MA – L2 – Q22 – Standard Costing and Variance Analysis

Prepare an operating statement for Tarkwa Industries using standard absorption costing for Product Z, showing specific variances.

Question

Tarkwa Industries uses a standard absorption costing system. Standard data per unit of Product Z is as follows:

	GH₵ per unit	GH₵ per unit
Standard sales price		6.00
Direct labour cost	0.64
Direct material cost	3.00
Variable production overheads	0.16
		3.80
Contribution		2.20
Fixed overheads		0.20
Profit		2.00

The budgeted production and sales volume for Product Z was 12,000 units. Budget for 2,400 direct labour hours (12,000 units):

5 units to be produced per hour
Standard labour cost is GH₵3.20 per hour
Standard material cost is GH₵1.50 per kilogram and each unit requires 2 kilos
Budgeted fixed overheads GH₵2,400
Budgeted variable overhead cost per direct labour hour = GH₵0.80.

Actual results for the same period:

11,500 units were manufactured
2,320 direct labour hours were worked, and cost GH₵7,540
25,000 kilos of direct material were purchased (and used) at a cost of GH₵1.48 per kilogram.

Other information:

Inventory is valued at standard cost of production.
Actual variable overheads were GH₵1,750
Actual fixed overheads were GH₵2,462
10,000 units were sold for GH₵62,600.

Required:
Prepare operating statements for the period using:
(a) standard absorption costing.
To prepare the absorption costing operating statement, you should show the variable overhead expenditure and efficiency variances, and the fixed overhead expenditure and volume variances.

(b) standard marginal costing.

Answer

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Tags: Absorption costing, Budgeting, Labour variance, Material variance, Operating Statement, Overhead variance, Performance Analysis, Sales variance, Standard Costing, Variance analysis
Level: Level 2

Topic: Standard costing and variance analysis

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

Question

The following list of account balances was extracted from the books of Kweku at 30 April 20X9.

	Dr GH¢(000)	Cr GH¢(000)
Revenue		18,955
Purchases	12,556
Inventory 1 May 20X8	3,776
Salaries and wages	2,447
Motor expenses	664
Rent	456
Rates	120
Insurance	146
Packing expenses	276
Lighting and heating expenses	665
Sundry expenses	115
Motor vehicles	2,400
Fixtures and fittings	600
Trade receivables	4,577
Trade payables		3,045
Cash at bank	3,876
Cash in hand	120
Drawings	2,050
Capital		12,844
	34,844	34,844

Notes at 30 April:
(1) Expenses which have been prepaid – rates GH¢20,000; Insurance GH¢35,000.
(2) Expenses which are owing – motor expenses GH¢56,000; rent GH¢24,000; sundry expenses GH¢26,000.
(3) Inventory GH¢4,998,000.

Required:
From the list of balances and the notes, prepare Kweku’s statement of profit or loss for the year ended 30 April 20X9 and a statement of financial position at that date.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Inventory, Ledger accounts, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

MA – L2 – Q21 – Standard costing and variance analysis

Calculate material, labour, and overhead variances for Tarkwa Manufacturing Ltd. for Period 1 using standard absorption costing.

Question

Tarkwa Manufacturing Ltd., based in Kumasi, uses a standard absorption costing system in accounting for its production costs.
The standard cost of a unit of product is as follows:

	Standard quantity	Standard price/rate (GH₵)	Standard cost (GH₵)
Direct materials	5 kilos	6.00	30.00
Direct labour	20 hours	4.00	80.00
Variable production overhead	20 hours	0.20	4.00
Fixed production overhead	20 hours	5.00	100.00

The following data relates to Period 1:
Budgeted output: 25,000 units
Actual output – produced: 20,000 units
Units sold: 15,000 units
Materials put into production: 120,000 kilos
Materials purchased: 200,000 kilos
Direct labour hours paid: 500,000 hrs

Due to a power failure, 10,000 hours were lost.
Cost of materials used (120,000 kg): GH₵825,000
Rate per direct labour hour: GH₵5
Variable production overhead: GH₵70,000
Fixed production overhead: GH₵2,100,000

Required:
Calculate, for Period 1:

The material price variance
The material usage variance
The direct labour rate variance
The direct labour idle time variance
The direct labour efficiency variance
The variable overhead total cost variance
The fixed overhead expenditure variance
The fixed overhead volume variance
The total manufacturing cost variance

Answer

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Tags: Absorption costing, Idle time, Labour variance, Manufacturing costs, Material variance, Overhead variance, Standard Costing, Variance analysis
Level: Level 2

Topic: Standard costing and variance analysis

MA – L2 – Q20 – Standard costing and variance analysis

Calculate material, labour, and overhead variances for South-East Enterprises' product EAGLE using standard costing data for July 20X8.

Question

The following data were extracted from South-East Enterprises’ records for July 20X8 in respect of product EAGLE:

Standard cost/unit


Raw material (50kg @ GH₵5 per kg)	250
Labour (2 hours @ GH₵60 per hour)	120

Budget
Production: 2,000 Units
Fixed overheads: GH₵1,500,000
Variable overheads: GH₵1,800,000
Labour hours: 4,000
Standard hours of production: 4,000

Actual
Production: 2,400 Units
Direct material purchased: 110,000 kg @ GH₵605,000
Opening inventory direct material: 1,000 kg
Closing inventory direct material: 4,000 kg
Wages paid (4,900 hours): GH₵318,500
Fixed overhead: GH₵1,650,000
Variable overhead: GH₵2,280,000

Required:
Compute the following variances:
(a) Material price variance
(b) Material usage variance
(c) Labour rate variance
(d) Labour efficiency variance
(e) Variable overhead expenditure variance
(f) Variable overhead efficiency variance
(g) Fixed overhead efficiency variance

Answer

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Tags: Absorption costing, Labour variance, Manufacturing costs, Material variance, Overhead variance, Standard Costing, Variance analysis
Level: Level 2

Topic: Standard costing and variance analysis

FA – L1 – Q40 – Accruals and prepayments

Prepare rent receivable and interest payable ledger accounts for James for 20X9 based on given rental and interest data.

Question

James owns various properties which he rents out under short-term lets; some tenants pay in advance, some in arrears. Similarly with his various borrowings the interest is paid in arrears and in advance.
During 20X9 rent collected was GH₵229,500 and interest charged to the statement of profit or loss was GH₵52,500.
Rents receivable and paid in advance together with amounts of interest prepaid and payable at the statement of financial position dates were as follows.

	31 December
	20X8	20X9
	GH₵	GH₵
Rents owed by tenants	34,200	40,500
Rents prepaid by tenants	20,700	15,300
Prepaid interest	3,500	5,600
Interest payable	9,800	7,000

Required
Write up the rent receivable account and the interest payable account for the year ended 31 December 20X9.

Answer

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Tags: Accruals, Financial Statements, Interest Payable, Ledger accounts, Prepayments, Rent Receivable
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

Question

JOHNNY
Johnny is in business as an antique dealer. The trial balance of his business at 1 January 20X9 was as follows.

	Dr GH₵(000)	Cr GH₵(000)
Capital		5,000
Cash	4,200
Motor van	600
Trade payable – A		200
Trade receivable – B	300
Rates prepaid	100
	5,200	5,200

Cash transactions during the period to 31 March 20X9 were

	GH₵(000)
Purchases	2,000
Revenue	3,000
Drawings	500
Motor running expenses	350
Rates	250

At 31 March inventory was GH₵700,000 and rates paid in advance amounted to GH₵150,000.

Required
(a) Prepare the trial balance at 31 March 20X9.

(b) Prepare the statement of profit or loss for the period to 31 March 20X9 and a statement of financial position at that date.

Answer

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Tags: Cash Transactions, Financial Statements, Inventory, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

MA – L2 – Q19 – Standard Costing and Variance Analysis

Calculate the direct material price variance for Zaytuna Enterprises' Eco Blocks.

Question

Zaytuna Enterprises operates a standard absorption costing system to control the manufacturing costs of its single product, “Eco Blocks”. The following standards have been set:

Description	Standard
Direct material	2 kgs at GH₵6/kg
Direct labour	1 hr at GH₵7/hr
Fixed overheads	GH₵9
Total production cost	GH₵28

The fixed overhead standard cost per unit is based on a budgeted monthly production of 4,000 units.
Actual results for the most recent month were:

Description	Actual
Production	4,300 units
Direct material cost	GH₵56,000 for 9,000 kgs
Direct labour cost	GH₵32,800 for 4,600 hours paid, only 4,000 hours were worked
Fixed overhead	GH₵35,000

No direct material inventories are held.

Required

Calculate the following variances:

(a) Direct material price

(b) Direct material usage

(d) Direct labour efficiency

(e) Idle time

(f) Fixed overhead expenditure

(g) Fixed overhead volume

(h) Fixed overhead capacity

Answer

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Tags: Absorption costing, Labour variances, Manufacturing costs, Material variances, Overhead variances, Standard Costing, Variance analysis
Level: Level 2

Topic: Standard costing and variance analysis

FA – L1 – Q38 – Accruals and prepayments

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

Question

The following is an extract from the trial balance of Nyame at 31 December 20X9.

| | Dr | Cr | |

| GH¢(000) | GH¢(000) |

| Stationery | 560 |

| | Rent | 900 | |

| Rates | 380 | |

| Lighting and heating | 590 | |

| Insurance | 260 | |

| Wages and salaries | 2,970 | |

There was stationery still in hand at 31 December 20X9 which had cost GH¢15,000.
Rent of GH¢300,000 for the last three months of 20X9 had not been paid and no entry has been made in the books at all for it.
Of the rates, GH¢280,000 was for the year ended 31 March 20Y0. The remaining GH¢100,000 was for the three months ended 31 March 20X9.
Fuel had been delivered on 18 December 20X9 at a cost of GH¢15,000 and had been consumed before the end of 20X9. No invoice had been received for the GH¢15,000 fuel in 20X9 and no entry has been made in the records of the business.
GH¢70,000 of the insurance paid was in respect of insurance cover for the year 20Y0.
Nothing was owing to employees for wages and salaries at the close of 20X9.
Required:
Record the above information in the relevant accounts for the year ended 31 December 20X9 and close the accounts.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Insurance, Ledger accounts, lighting and heating, Prepayments, rates, rent, stationery, Trial Balance
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q37 – Accruals and prepayments

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

Question

Vulcan owns a removal business and runs a small fleet of vans. He prepares his accounts to 31 December each year.
The following transactions occur in relation to insurance for the year 20X9.
1 January: The amount prepaid for insurance was GH¢1,140,000.
1 April: He paid GH¢840,000 insurance for the year ended 31 March 20Y0 on six of the vans.
1 May: He paid GH¢3,540,000 insurance for twenty vans for the year ended 30 April 20Y0.
1 July: He paid GH¢560,000 insurance for the remaining vans for the year ended 30 June 20Y0.

Required:
Write up the insurance account for the year ended 31 December 20X9.

Answer

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Tags: Accruals, Bookkeeping, Financial accounting, Insurance, Ledger accounts, Non-current Assets, Prepayments, Statement of Financial Position, Trial Balance, Year-end adjustments
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q36 – Accruals and prepayments

Write up water expense ledger accounts for 20X8 and 20X9 under different payment scenarios.

Question

Kieran started a business on 1 January 20X8.

Accounting year ended 31 December 20X8:

A new warehouse was acquired on 31 March 20X8. On 21 April 20X8, Kieran received a water bill demand for GH₵1,000,000 for the 12 months to 31 March 20X9. Payment was made, in full, on 30 April 20X8.

Accounting year ended 31 December 20X9:

An office extension was built. The water bill demand for the 12 months to 31 March 20Y0 was GH₵1,600,000. Kieran paid the full amount on 1 June 20X9.

Required:

(a) Write up the water expense ledger account for 20X8 and for 20X9.

(b) Assuming now that payments were made annually in arrears (i.e. GH₵1,000,000 on 31 March 20X9 and GH₵1,600,000 on 31 March 20Y0), write up the water expense ledger account for each of the two accounting years.

Answer

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Tags: Accruals, Financial Adjustments, Ledger accounts, Prepayments, Water Expense
Level: Level 1

Topic: Accruals and prepayments

Program (SQ): PROFESSIONAL PROGRAM

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MA – L2 – Q22 – Standard Costing and Variance Analysis

Prepare an operating statement for Tarkwa Industries using standard absorption costing for Product Z, showing specific variances.

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

MA – L2 – Q21 – Standard costing and variance analysis

Calculate material, labour, and overhead variances for Tarkwa Manufacturing Ltd. for Period 1 using standard absorption costing.

MA – L2 – Q20 – Standard costing and variance analysis

Calculate material, labour, and overhead variances for South-East Enterprises' product EAGLE using standard costing data for July 20X8.

FA – L1 – Q40 – Accruals and prepayments

Prepare rent receivable and interest payable ledger accounts for James for 20X9 based on given rental and interest data.

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

MA – L2 – Q19 – Standard Costing and Variance Analysis

Calculate the direct material price variance for Zaytuna Enterprises' Eco Blocks.

FA – L1 – Q38 – Accruals and prepayments

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

FA – L1 – Q37 – Accruals and prepayments

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

FA – L1 – Q36 – Accruals and prepayments

Write up water expense ledger accounts for 20X8 and 20X9 under different payment scenarios.

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Prepare an operating statement for Tarkwa Industries using standard absorption costing for Product Z, showing specific variances.

You're reporting an error for "MA – L2 – Q22 – Standard Costing and Variance Analysis"

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

You're reporting an error for "FA – L1 – Q41 – Preparing financial statements of a sole trader"

Calculate material, labour, and overhead variances for Tarkwa Manufacturing Ltd. for Period 1 using standard absorption costing.

You're reporting an error for "MA – L2 – Q21 – Standard costing and variance analysis"

Calculate material, labour, and overhead variances for South-East Enterprises' product EAGLE using standard costing data for July 20X8.

You're reporting an error for "MA – L2 – Q20 – Standard costing and variance analysis"

Prepare rent receivable and interest payable ledger accounts for James for 20X9 based on given rental and interest data.

You're reporting an error for "FA – L1 – Q40 – Accruals and prepayments"

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

You're reporting an error for "FA – L1 – Q39 – Preparing financial statements of a sole trader"

Calculate the direct material price variance for Zaytuna Enterprises' Eco Blocks.

You're reporting an error for "MA – L2 – Q19 – Standard Costing and Variance Analysis"

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

You're reporting an error for "FA – L1 – Q38 – Accruals and prepayments"

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

You're reporting an error for "FA – L1 – Q37 – Accruals and prepayments"

Write up water expense ledger accounts for 20X8 and 20X9 under different payment scenarios.

You're reporting an error for "FA – L1 – Q36 – Accruals and prepayments"

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