- 20 Marks
MA – L2 – Q31 – Standard costing and variance analysis
Explain types of standards, purposes of standard costing, its problems, and calculate sales, material, wage, and overhead variances for NORGA LIMITED.
Question
NORGA LIMITED
Required:
(a) Explain the following types of standards, stating one advantage and one disadvantage of each:
(i) Basic cost standard
(ii) Ideal standards
(iii) Currently attainable standard
(b) State five purposes of standard costing
(c) State seven problems of standard costing in a modern manufacturing environment
(d) From the information provided, calculate the following:
(i) Sales price and sales volume variances
(ii) The total material variance
(iii) The total wage variances
(iv) Total manufacturing overhead variances
(v) Reconciliation of budgeted profit to actual profit
Additional Information:
The following additional information was extracted from the management accounts:
| GH₵ | |
|---|---|
| Budgeted net profit for the period | 200,000 |
| Actual profit | 45,000 |
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