Labour Rate Variance

IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

Question

a) Public Sector in Ghana includes the Metropolitan, Municipal and District Assemblies
(MMDA’s) and the Ministries, Departments and Agencies (MDA’s). The private sector
dominates in terms of numbers and are significantly different in operations from the public
sector.
Required:
In reference to the above statement, explain FOUR (4) key differences between a private
sector entity and a public sector entity. (10 marks)
b) Konka Ltd produces a product – “the telescope”.
Actual results for the period were:
Production: 430 units made
Materials: 1,075 kg were used.
1,200 kg of materials were purchased at a cost of GH¢17,700
Direct labour: 1,700 hours were worked at a cost of GH¢14,637
Variable production overheads expenditure: GH¢3,870.

The standard cost card for the product is as follows:
GH¢
Direct material 2 kg x GH¢15 30
Direct labour 4hrs x GH¢8.50 34
Variable overhead 4hrs x GH¢2.00 8
The cost card is based on production and sales of 450 units in each period.
The company values its inventories at standard cost.
Required:
Calculate the following variances for Konka Ltd:
i) Material price variance
ii) Material usage variance
iii) Labour rate variance
iv) Labour efficiency variance
v) Variable overhead expenditure variance
(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Labour Efficiency Variance, Labour Rate Variance, Material Price Variance, Material Usage Variance, Private Sector, Public Sector, Variable Overhead Variance
Level: Level 1

Topic: Standard Costing and Variance Analysis
Series: JULY 2023

IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis

Computation of variances for a product, derivation of a cost prediction formula using the high-low method, and explanation of seasonal variation models.

Question

a) Magawa Ltd operates a standard variables costing system and manufactures a single product called “Magic Touch”.

The following quantities, costs and prices data have been extracted for the period just ended March 31, 2021 in respect of Magic Touch:

Standard cost card:

	GH¢
Direct materials	15g at GH¢10/g = 150
Direct labour	8 hours at GH¢6/hour = 48
Variable overheads	8 hours at GH¢4/hour = 32
Standard contribution	25
Standard selling price per unit	255

Budgeted production units: 1,500

Actual results for the period ended March 31, 2021 were as follows:


Production and sales units	1,650
Selling price per unit	GH¢278
Direct materials used	23,760g
Direct materials costs	GH¢308,880
Direct labour hours worked	10,725
Direct labour costs	GH¢85,800
Variable overheads	GH¢68,000

Required: i) Compute the following variances for Magawa Ltd for the period ended March 31, 2021:

Direct materials price variance. (1 mark)
Direct materials usage variance. (1 mark)
Direct labour rate variance. (1 mark)
State ONE (1) possible reason for the material price variance calculated. (1 mark)
State ONE (1) possible reason for the labour rate variance calculated. (1 mark)

b) The Valuation Department of a large firm of surveyors wishes to develop a method of predicting its total costs in a period. The following past costs and activity levels have been recorded.

Period	Number of Valuations (V)	Total Cost (TC) GH¢
1	420	82,200
2	515	90,275
3	425	82,900
4	500	90,000

Required: i) Derive a formula for the total cost model for a period. (4 marks) ii) Evaluate the usefulness of the high-low method. (4 marks)

c) The trend line on its own is not sufficient to make forecasts for the future. Estimates of the size of the ‘seasonal’ variation for each of the different seasons are needed. The seasonal variation is then used to adjust a forecast trend.

Required: Explain TWO (2) models used to estimate seasonal variations. (7 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Prediction, High-Low Method, Labour Rate Variance, Material Price Variance, Material Usage Variance, Seasonal Variation Models
Level: Level 1

Topic: Standard Costing and Variance Analysis
Series: APR 2022

IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Labour Efficiency Variance, Labour Rate Variance, Material Price Variance, Material Usage Variance, Private Sector, Public Sector, Variable Overhead Variance
Level: Level 1

Topic: Standard Costing and Variance Analysis
Series: JULY 2023

IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis

Computation of variances for a product, derivation of a cost prediction formula using the high-low method, and explanation of seasonal variation models.

Question

a) Magawa Ltd operates a standard variables costing system and manufactures a single product called “Magic Touch”.

The following quantities, costs and prices data have been extracted for the period just ended March 31, 2021 in respect of Magic Touch:

Standard cost card:

	GH¢
Direct materials	15g at GH¢10/g = 150
Direct labour	8 hours at GH¢6/hour = 48
Variable overheads	8 hours at GH¢4/hour = 32
Standard contribution	25
Standard selling price per unit	255

Budgeted production units: 1,500

Actual results for the period ended March 31, 2021 were as follows:


Production and sales units	1,650
Selling price per unit	GH¢278
Direct materials used	23,760g
Direct materials costs	GH¢308,880
Direct labour hours worked	10,725
Direct labour costs	GH¢85,800
Variable overheads	GH¢68,000

Required: i) Compute the following variances for Magawa Ltd for the period ended March 31, 2021:

Direct materials price variance. (1 mark)
Direct materials usage variance. (1 mark)
Direct labour rate variance. (1 mark)
State ONE (1) possible reason for the material price variance calculated. (1 mark)
State ONE (1) possible reason for the labour rate variance calculated. (1 mark)

b) The Valuation Department of a large firm of surveyors wishes to develop a method of predicting its total costs in a period. The following past costs and activity levels have been recorded.

Period	Number of Valuations (V)	Total Cost (TC) GH¢
1	420	82,200
2	515	90,275
3	425	82,900
4	500	90,000

Required: i) Derive a formula for the total cost model for a period. (4 marks) ii) Evaluate the usefulness of the high-low method. (4 marks)

Required: Explain TWO (2) models used to estimate seasonal variations. (7 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Prediction, High-Low Method, Labour Rate Variance, Material Price Variance, Material Usage Variance, Seasonal Variation Models
Level: Level 1

Topic: Standard Costing and Variance Analysis
Series: APR 2022

Question Tag: Labour Rate Variance

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IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis

Computation of variances for a product, derivation of a cost prediction formula using the high-low method, and explanation of seasonal variation models.

IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis

Computation of variances for a product, derivation of a cost prediction formula using the high-low method, and explanation of seasonal variation models.

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IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

You're reporting an error for "IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis"

IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis

Computation of variances for a product, derivation of a cost prediction formula using the high-low method, and explanation of seasonal variation models.

You're reporting an error for "IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis"

IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

You're reporting an error for "IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis"

IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis

Computation of variances for a product, derivation of a cost prediction formula using the high-low method, and explanation of seasonal variation models.

You're reporting an error for "IMAC – APRIL 2022 – L1 – Q5 – Standard Costing and Variance Analysis"

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