Question Tag: Variance Analysis

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 5 Marks

MA – Nov 2024 – L2 – Q4b – Standard Costing and Variance Investigation

Explanation of the use of standard costing in decision-making and key factors to consider before investigating variances.

Standard costing has been employed by organizations as a control technique to analyze the deviation of results from those that are expected.

Required:

i) Explain TWO ways managers have effectively deployed standard costing as a tool in decision-making analysis.

ii) Explain THREE key factors a manager should consider before deciding to institute an investigation into reported variances.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Nov 2024 – L2 – Q4b – Standard Costing and Variance Investigation"

  • 10 Marks

MA – Nov 2024 – L2 – Q3a – Flexible Budget and Variance Analysis

Preparation of a flexible budget and calculation of sales, material, and labour variances.

The budget and actual income statement of Shatta Company PLC for the month of April have been presented in the table below:

Budget Actual
Output (production and sales) 10,000 9,000
GH¢ GH¢
Sales Revenue 175,000 162,000
Raw Materials (80,000) (100,000 meters) (64,380) (74,000 meters)
Labour (35,000) (5,000 hours) (30,960) (4,300 hours)
Fixed Overheads (35,000) (36,225)
Operating Profit 25,000 30,435

Required:

i) Prepare a flexible budget for Shatta Company PLC.

ii) Calculate the following variances using the marginal costing system:

  • Sales (price, volume)
  • Material (price and usage)
  • Labour (rate and efficiency)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Nov 2024 – L2 – Q3a – Flexible Budget and Variance Analysis"

  • 6 Marks

ICMA – Nov 2024 – L1 – Q3c – Material and Labour Variances

Calculates material and labour variances based on given actual and standard cost data.

Material and Labour Variances
The data below relates to Agbamame Enterprise for its flagship product, “Herb of Life”:

Standard Cost Card – Per Unit of Herb of Life

Description Cost (GH¢)
Direct materials 5 kg at GH¢4 per kg = GH¢20
Direct labour 4 hours at GH¢15 per DLH = GH¢60
Variable overhead 4 hours at GH¢20 per DLH = GH¢80
Fixed overhead GH¢50 per unit

Budgeted production: 600 units
Actual sales and production: 550 units

Actual cost of:

Actual Costs Cost (GH¢)
Labour (1650 hours) 16,500
Materials (1650 kg) 5,775
Fixed overhead 15,000
Variable overhead 13,275

Data shows that 5% of labour hours paid for was idle, and 10% of materials bought was in stock at the end of the period.

Required:
i) Calculate the material variances.
ii) Calculate the labour variances.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "ICMA – Nov 2024 – L1 – Q3c – Material and Labour Variances"

  • 15 Marks

PM – Nov 2014 – L2 – Q6 – Standard Costing and Variance Analysis

Reconcile budgeted and actual gross profits for GOODLAND Limited, including variance calculations.

GOODLAND Limited produces and sells a single product. The company adopts a standard absorption costing system and absorbs overheads on the basis of direct labour hours. Presented below are the standard cost details and selling price for a single unit of the product:

It has been estimated that the production and sales for the month would be 2,000 units. However, the estimated production for the month has been used as a basis for determining the fixed overhead absorption rate.

The actual results for the month are as follows:

Required:

Prepare a statement that reconciles the budgeted gross profit with the actual gross profit for the month with a detailed computation of all the variances involved. (15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – Nov 2014 – L2 – Q6 – Standard Costing and Variance Analysis"

  • 20 Marks

PM – Nov 2014 – L2 – Q2 – Standard Costing and Variance Analysis

Calculate various cost and sales variances, including an operating statement for Ibek Limited.

Ibek Limited manufactures a standard product and operates a system of variance accounting using a fixed budget.

As a newly appointed Management Accountant, you are responsible for preparing the monthly operating statements.

Extracts from the budget for the standard product cost and actual data for the month ended 31 December 2013 are given below:

Budgeted and Standard Cost Data:

  • Budgeted sales and production for the month: 20,000 units
  • Standard cost for each unit of product:
Item Details
Direct materials: A: 10 kg at N2 per kg
B: 5 kg at N10 per kg
Direct wages 5 hours at N6 per hour
Fixed overhead Absorbed at 200% of direct wages
  • Budgeted sales price has been calculated to give a margin of 20% of sales price.

Actual Data for the Month Ended 31 December 2013:

  • Production: 19,000 units sold at a price of 15% higher than that budgeted
  • Direct materials consumed:
Item Quantity Cost per kg
Material A 192,000 kg N2.40
Material B 96,000 kg N9.40
  • Direct wages incurred: 92,000 hours at N6.40 per hour
  • Fixed production overhead incurred: N580,000

Required:

(a) Prepare the operating statement for the month ended 31 December 2013. (3 Marks)

(b) Calculate the following variances: i. Direct material cost variance (5 Marks)
ii. Direct labour variances (5 Marks)
iii. Overhead variances (3 Marks)
iv. Sales variances (4 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – Nov 2014 – L2 – Q2 – Standard Costing and Variance Analysis"

  • 20 Marks

PM – Nov 2015 – L2 – Q2 – Standard Costing and Variance Analysis

Calculate material price and usage planning and operational variances for wheat used in baking cake and bread, and discuss the benefits of these variances.

Pestel Limited produces cake and bread which it supplies to a major supermarket in
Abuja. It holds no inventories because it adopts the Just-In-Time (JIT) system.
The standard cost of the wheat used in baking the products is N200 per kg. Each piece
of cake uses 0.5kg of wheat while each loaf of bread uses 2kg of wheat.
The production levels for cake and bread for the month of October were as follows:

The actual cost of wheat in October was N232 per kg. 496,000kg of wheat was used to
bake the bread and 190,000kg was used to bake the cake.
The global prices of wheat increased by 18% in the month of October.

At the beginning of the month, the supermarket group made an expected request for an
immediate shape change to the cake resulting in 5% more wheat than previously
required. This change also brought about production delays which caused a reduction in
production by 20,000 units of cake in that month. The production director is given the
task of purchasing relevant input materials and any production request which occur,
although he does not take responsibility for setting standard costs.
Required:

(a) Compute the following variances for the month of October for each product and in total:

(i) Material price planning variances, (4 Marks)

(ii) Material price operational variances. (4 Marks)

(iii) Material usage planning variances, (4 Marks)

(iv) Material usage operational variances (4 Marks)

(b) Discuss the benefits of planning and operational variances to a management accountant. (4 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – Nov 2015 – L2 – Q2 – Standard Costing and Variance Analysis"

  • 20 Marks

PM – May 2024 – L2 – SB – Q3 – Budgeting and Budgetary Control

Evaluation of budgeting systems and identification of behavioral issues with variance reporting in a recently acquired company.

Ogbunigwe Nigeria Limited is a big and reputable publishing firm established in the early 1970’s. The company has recently been taken over by Wisdom International Publishing Company (WIPC) – a multinational company operating in several countries of the world.

Mr. Pampam, who is the Managing Director of WIPC, has been sent from the company’s headquarters to review, among other things, the budgeting and reporting system used by Ogbunigwe Nigeria Limited.

During his visit to all the departments, he discovered that monthly budgets are prepared for each department in the company. Upon request, the newly acquired company submitted the last budget statement for the notebook production department, which covered Quarter 3 of 2022, as shown below:

Budget statement for Quarter 3
Department: Notebook Production

Particulars Actual Results (N’000) Budget (N’000) Variances (N’000)
Direct materials 1,512 1,440 (72)
Direct labor 738 720 (18)
Variable production overhead 474 432 (42)
Fixed production overhead 354 336 (18)
Variable administrative overhead 246 240 (6)
Fixed administrative overhead 300 288 (12)
Total costs 3,624 3,456 (168)
Sales value of production 4,650 4,464 186
Profit 1,026 1,008 18

The Head of Department of the notebook production department, Mr. Josiah Okoli, commented on the state of affairs of the department. He revealed that the budget statement presented was based on 72,000 units with a standard labor processing time of 2.85 hours per unit.

Mr. Pampam observed that Mr. Josiah Okoli was not enthusiastic about the budget system. He viewed it as a pressure system imposed by the company to portray some departmental managers in a bad light. He pointed out that the system was hurriedly introduced by Dynamic Financial Konsult about twelve months ago. The consultant did not provide sufficient explanation to assist users of the budget to understand the system. Mr. Josiah Okoli expressed doubt about the competence of the consultant and believed the system was not suitable for Ogbunigwe Nigeria Limited. He even stated that his department might have actually made a loss, as against the reported profit.

This situation cuts across many departments, making it imperative and urgent to resolve the issues with the budget system. Your advice to Mr. Pampam will assist tremendously in addressing these problems.

Required:
a. Redraft the budget statement in a more informative manner, showing the relevant variances. (12 Marks)
b. State the general behavioral problems associated with budgeting, and relate these issues to this situation. (4 Marks)
c. Recommend ways to make the budgeting system more useful and acceptable in the current situation. (4 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2024 – L2 – SB – Q3 – Budgeting and Budgetary Control"

  • 20 Marks

PM – May 2024 – L2 – SB – Q2 – Costing Systems and Techniques

The impact of lean manufacturing on variance analysis and the transition from traditional costing to lean accounting.

Kenny Katuma (KK) manufactures standard engine components. It operates a costing system based on absorption costing and standard costs, and the management control system is based on monthly variance analysis reports.
KK has recently appointed a new CEO, who has begun to introduce changes to the manufacturing systems. He believes in lean manufacturing principles and has begun to establish a just-in-time manufacturing system, with a focus on reducing inventories and production cycle times, and eliminating waste. Discussions are in progress with major suppliers to introduce just-in-time purchasing arrangements.
The CEO has informed the management accountant that changes will be needed to the company’s internal accounting systems. He has also indicated that KK will need a lean management accounting system to support its lean manufacturing system. The CEO is dissatisfied with many features of the current management accounting system. There are many errors in data capture for the cost accounting system, and monthly variance reports are not produced until two weeks after the end of each month. He also considers that wrong information is being reported.

Required:
a. Explain the main principles of a lean information system. (6 Marks)
b. Discuss the reasons why KK’s current cost and management accounting systems do not fulfill the requirements of lean information systems. (7 Marks)
c. Identify the changes that should be made to KK’s management accounting system in order to turn it into a lean information system. (7 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2024 – L2 – SB – Q2 – Costing Systems and Techniques"

  • 12 Marks

MI – Nov 2020 – L1 – SB – Q4b – Basic Variance Analysis

Calculate material and labour variances for product AB, and list possible causes of each variance.

b. ABC maintains the following standard cost card for product AB:

Item Standard Quantity Standard Price Total Cost (N)
Direct Material A 3kg @ N8 per kg N24
Direct Material B 5kg @ N6 per kg N30
Direct Labour 2hrs @ N24 per hr N48
Variable Overhead 2hrs @ N9 per hr N18
Total Standard Cost N120

Actual Results for the Period:

  • Actual production: 11,800 units
  • Direct material A: 35,800kg @ N7.5 per kg = N268,500
  • Direct material B: 62,000kg @ N7 per kg = N434,000
  • Direct labour: 24,500 hours @ N25 per hour = N612,500
  • Variable overhead: 24,500 hours @ N9 per hour = N220,500

Required:
i. Calculate the following variances:

  • Material price
  • Material usage
  • Total material
  • Labour rate
    (9 Marks)

ii. List TWO possible causes of each of the variances in (i) above. (3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MI – Nov 2020 – L1 – SB – Q4b – Basic Variance Analysis"

  • 15 Marks

PM – May 2022 – L2 – SA – Q6 – Budgeting and Budgetary Control

Preparation of flexible budgets for varying production levels and analysis of variances.

Ezenwa Nigeria Limited is a company which produces a single product on an assembly line. The budget personnel has been availed with the following information which represents the extremes of high and low volumes of production which the company will achieve over a three month period.

Costs Production of 80,000 units Production of 160,000 units
Direct materials 3,200,000 6,400,000
Indirect materials 480,000 800,000
Direct labour 2,000,000 4,000,000
Power 720,000 960,000
Repairs 800,000 1,200,000
Supervision 800,000 1,440,000
Rent, insurance and rates 360,000 360,000

Additional Information:
Supervision is a “step function”. To this end, one supervisor is employed for all production levels up to and including 100,000 units. For higher levels of production, an assistant supervisor whose remuneration is N640,000 will be added.

Required:
a. Prepare a set of flexible budgets for presentation to the Production Director to cover the following levels of production over a period of three months:
i. 80,000 Units
ii. 100,000 Units
iii. 120,000 Units
iv. 140,000 Units
v. 160,000 Units (9 Marks)

b. During the three months July to September 2021, 100,000 units were produced. Actual costs incurred during this period were as follows:

Costs Amount (N)
Direct materials 4,150,000
Indirect materials 580,000
Direct labour 2,700,000
Power 760,000
Repairs 885,000
Supervision 850,000
Rent, insurance and rates 320,000

Required:
i. Prepare a budget report for presentation to the Production Director displaying all relevant variances. (3 Marks)
ii. For each variance, suggest any further investigations which might be required and the necessary actions required to be taken by the Director. (3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2022 – L2 – SA – Q6 – Budgeting and Budgetary Control"

  • 10 Marks

MA – Mar 2023 – L2 – Q3a – Standard costing and variance analysis

Prepare a standard cost card for one door using the provided variances and actual costs.

Tsekpo produces strong and affordable doors for the Ghanaian market. The company has been operating for the past five years from its manufacturing base at Tafo.

During the year under consideration, Tsekpo invested in a new information technology system in order to improve its management accounting information. Unfortunately, there have been problems with the software since its acquisition. The standard cost card, which provides details of the standard production cost to make one door, has been lost and the company is unable to prepare its budget for the year ahead.

The Management Accountant has retrieved some information relating to actual costs and variances for the year. The budgeted production for the year was 21,000 doors. Other relevant information is shown below:

Actual Costs:

Cost Element Actual Quantity Amount (GH¢)
Direct material costs (16,200 sq. m) 16,200 sq. m 81,000
Direct labour costs (8,640 hours) 8,640 hours 108,864
Variable production overhead costs N/A 54,000
Fixed production overhead costs N/A 85,200
Variances:

Direct material price variance: GH¢4,050 (Favorable)
Direct material usage variance: GH¢5,670 (Favorable)
Direct labour rate variance: GH¢864 (Favorable)
Direct labour efficiency variance: GH¢27,432 (Favorable)
Variable production overhead expenditure variance: GH¢432 (Adverse)
Variable production overhead efficiency variance: GH¢13,392 (Favorable)
Fixed production overhead expenditure variance: GH¢3,775 (Adverse)
Additional Information:

Actual production was 600 doors above the budgeted level.
Tsekpo operates a standard variable costing system.
Required:
Using the information provided, prepare the standard cost card for the production of one door.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Mar 2023 – L2 – Q3a – Standard costing and variance analysis"

  • 10 Marks

MA – Aug 2022 – L2 – Q3a – Standard costing and variance analysis

This question asks for the calculation of five types of fixed overhead variances based on given production data.

The data below relates to Odeneho Plc and they are in respect of the production of its product, Milcho, for the first quarter ended 31 March 2022.

  • Budgeted output: 5,000 units
  • Standard hours to produce one unit: 2 hours
  • Budgeted fixed production overhead: GH¢25,000
  • Actual fixed production overhead incurred: GH¢25,840
  • Actual hours worked: 10,500
  • Actual units produced: 4,980

Required:
Determine the following:
i) Fixed overhead expenditure variance.
(2 marks)

ii) Fixed overhead capacity variance.
(2 marks)

iii) Fixed overhead efficiency variance.
(2 marks)

iv) Fixed overhead volume variance.
(2 marks)

v) Fixed production overhead variance.
(2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Aug 2022 – L2 – Q3a – Standard costing and variance analysis"

  • 10 Marks

MA – Dec 2023 – L2 – Q3a – Standard costing and variance analysis

This question involves calculating various cost and sales variances for Odumasi Ltd under a standard marginal costing system.

Odumasi Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product, which the company manufactures – ‘Tekie’. The system became operational on 1 March 2021.

The Management Accountant has consulted with the Senior Engineer and they have agreed on the following standard specifications to manufacture one unit of the product ‘Tekie’:

  • Direct materials: 4 kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour

According to the Marketing Director, Odumasi Ltd operates in an industry where the budgeted selling price is normally calculated to achieve a markup of 30% on cost. The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

The actual results for the month of March 2021 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000.
  • Production: 23,000 units.
  • Direct Materials: 90,000 kg @ GH¢162,000.
  • Direct labour: 48,000 hours @ GH¢576,000.
  • Variable overhead: GH¢350,000.

Required:
Calculate the relevant variances for March 2021 under the headings of sales, materials, labour, and overheads.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Dec 2023 – L2 – Q3a – Standard costing and variance analysis"

  • 12 Marks

MA – May 2018 – L2 – Q5a – Standard Cost Variances Analysis

Calculate standard cost variances including sales price, material price, and labour efficiency.

The following information relates to product Jupiter, produced by Bfield Ltd during January. This represents the information that remains after a fire in the premises destroyed most of the accounting records.

Variances GH¢
Selling price 50,000 A
Materials price 28,500 F
Materials usage 7,500 A
Labour rate 18,700 F
Labour efficiency 20,400 A

Actual data

  • Sales (25,000 units at GH¢10) = GH¢250,000
  • Materials costs (112,500 kg at GH¢1.20) = GH¢135,000
  • Labour costs (75,000 hrs. at GH¢1.9) = GH¢142,500

There was no opening or closing inventories.

Required:
Calculate the following:
i) Standard selling price per unit; (3 marks)
ii) Standard cost of material per kilogram; (3 marks)
iii) Standard kilograms of materials required per unit; (2 marks)
iv) Standard labour rate per hour; (2 marks)
v) Standard hours of labour required per unit. (2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – May 2018 – L2 – Q5a – Standard Cost Variances Analysis"

  • 15 Marks

MA – Nov 2017 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate standard selling price, variances, break-even point, and margin of safety for a company using standard marginal costing.

Zealow Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product which the company manufactures, “The Stand.” The system became operational on 1 March 2017.

The Management Accountant has consulted with the Senior Engineer and they have agreed on the following standard specifications to manufacture one unit of the product known as “The Stand”:

  • Direct materials: 4kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour

The Marketing Director has advised that in Zealow Ltd’s industry, the budgeted selling price is normally calculated to achieve a mark-up of 30% on cost.

The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

The actual results for the month of March 2017 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000
  • Production: 23,000 units
  • Direct Materials: 90,000 kgs at a cost of GH¢162,000
  • Direct labour: 48,000 hours at a cost of GH¢576,000
  • Variable overhead: GH¢350,000

Required:

a) Calculate the standard selling price of one unit of “The Stand” and prepare a summary budgeted profit statement for Zealow Ltd for the month of March 2017.
b) Calculate the relevant variances for March 2017 under the headings of sales, materials, labour, and overheads.
c) Zealow Ltd uses a standard marginal costing system and therefore fixed costs have been ignored in the calculations shown above. Assuming that the fixed costs for the company are estimated to be GH¢1,879,200 per annum, calculate the monthly sales in both units and value that will be required to break-even and estimate the margin of safety, based on the current budget levels.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Nov 2017 – L2 – Q5 – Standard Costing and Variance Analysis"

  • 12 Marks

MA – May 2018 – L2 – Q3a – Standard Costing and Variance Analysis

Prepare profit statements for April and May using standard costing and absorption costing methods.

a) Resol Ltd commenced trading on 1 April 2011 making the product Resol. The standard cost sheet for Resol is as follows:

The fixed production overhead figure has been calculated on the basis of a budgeted normal output of 24,000 units per annum. Fixed Sales and Administration costs are estimated at GH¢24,000 per annum. You may assume that all budgeted fixed expenses are incurred evenly over the year.

The sales price is GH¢35.00 and the actual number of units produced and sold was as follows:

April May
Production – units 2,000 2,500
Sales – units 1,500 3,000

Required:
Prepare a profit statement for each of the months April and May using:

  • Standard costing
  • Absorption costing

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – May 2018 – L2 – Q3a – Standard Costing and Variance Analysis"

  • 9 Marks

MA – Nov 2018 – L2 – Q5b – Standard costing and variance analysis

Calculation and interpretation of efficiency, capacity, and production volume ratios for Ghana National Gas Company.

Ghana National Gas Company is a gas processing company and has its plant located in Atuabo in the Western Region. The plant produces three gas products – Lean Gas (LG), Liquefied Petroleum Gas (LPG), and Natural Gas Condensate (NGC).

The standard time for the production of the products are:

  • LG – 40 minutes per metric tonne
  • LPG – 30 minutes per metric tonne
  • NGC – 45 minutes per metric tonne

The budget for the month of February is as follows:

  • LG – 45,000 metric tonnes
  • LPG – 25,000 metric tonnes
  • NGC – 30,000 metric tonnes

The actual data for the month were as follows:

  • Labour hours: 70,000 hours
  • Production: LG – 48,000 metric tonnes, LPG – 27,000 metric tonnes, NGC – 25,000 metric tonnes

Required:

i) Compute and interpret the efficiency ratio. (3 marks)

ii) Compute and interpret the capacity ratio. (3 marks)

iii) Compute and interpret the production volume or activity ratio. (3 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Nov 2018 – L2 – Q5b – Standard costing and variance analysis"

  • 15 Marks

MA – July 2023 – L2 – Q2a – Budgetary control

This question involves preparing a statement to reconcile the budgeted contribution with the actual contribution using marginal costing principles and detailed variance analysis.

Bekwai manufactures and sells a single product. The company operates a standard marginal costing system and a just-in-time purchasing and production system. No inventory of raw materials or finished goods is held.

Details of the budget and actual data for the period are as follows:

Budget data:

Standard production cost per unit:
Direct material: 8kg @ GH¢10.80 per kg 86.40
Direct labour: 1.25 hours @ GH¢18.00 per hour 22.50
Variable overheads: 1.25 hours @ GH¢6.00 per hour 7.50

Standard selling price: GH¢180 per unit
Budgeted fixed production overheads: GH¢170,000
Budgeted production and sales: 10,000 units

Actual data:

  • Direct material: 74,000 kg @ GH¢11.20 per kg
  • Direct labour: 10,800 hours @ GH¢19.00 per hour
  • Variable overheads: GH¢70,000
  • Actual selling price: GH¢184 per unit
  • Actual fixed production overheads: GH¢168,000
  • Actual production and sales: 9,000 units

Required:
Using marginal costing principles, prepare a statement that reconciles the budgeted contribution and the actual contribution. (Your statement should show the variances in as much detail as possible).
(15 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – July 2023 – L2 – Q2a – Budgetary control"

  • 5 Marks

MA – Nov 2020 – L2 – Q4b – Standard Costing and Variance Analysis

Discuss the advantages and disadvantages of using standard costing in cost management.

b) Explain THREE (3) advantages and TWO (2) disadvantages of standard costing.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Nov 2020 – L2 – Q4b – Standard Costing and Variance Analysis"

  • 10 Marks

MA – Nov 2020 – L2 – Q3b – Standard Costing and Variance Analysis

Calculate various variances including sales volume contribution, price, mix, yield, labour rate, labour efficiency, and idle time variances for Zip Ltd.

b) Zip Ltd, a premium food manufacturer, is reviewing its operations for a three-month period for 2019. The company operates a standard marginal costing system and manufactures one product, ZP, for which the following standard revenue and cost data per unit of product is available:

  • Selling price: GH¢12.00
  • Direct material A: 2.5 kg at GH¢1.70 per kg
  • Direct material B: 1.5 kg at GH¢1.20 per kg
  • Direct labour: 0.45 hours at GH¢6.00 per hour
  • Fixed production overheads for the three-month period were expected to be GH¢62,500.

Actual data for the three-month period was as follows:

  • Sales and production: 48,000 units of ZP were produced and sold for GH¢580,800
  • Direct material A: 121,951 kg were used at a cost of GH¢200,000
  • Direct material B: 67,200 kg were used at a cost of GH¢84,000
  • Direct labour: Employees worked for 18,900 hours, but 19,200 hours were paid at a cost of GH¢117,120
  • Fixed production overheads: GH¢64,000

Required: Calculate the following variances:

i) Sales volume contribution and sales price variances
ii) Price, mix, and yield variances for each material
iii) Labour rate, labour efficiency, and idle time variances

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "MA – Nov 2020 – L2 – Q3b – Standard Costing and Variance Analysis"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@knowsia.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan