Variance analysis – Page 2

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

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

MA – L2 – Q18- Standard Costing and Variance Analysis

Calculate the standard quantity of material used in production for GrainWorks Plc.

Question

GrainWorks Plc uses a standard costing system. Fixed production overhead is absorbed on the basis of direct labour hours. The following data relate to a particular period of operation:

Description	Value
Standard price of material/kg	GH₵45.90
Actual material issued to production	4,110 kg
Standard labour hours	1,680
Actual direct labour hours	1,760
Actual fixed overhead	GH₵45,620

The following variances were calculated at the end of the period:

Variance	Value
Direct material cost	GH₵702 (A)
Direct material usage	GH₵531 (F)
Direct labour efficiency	GH₵336 (A)
Direct labour cost	GH₵16 (F)
Fixed overhead cost	GH₵92 (F)

Required:
(a)(i) Calculate the standard quantity of material.

(ii) Calculate the actual price of material per kg.

(iii) Calculate the standard direct labour rate.

(iv) Calculate the actual direct labour rate.

(b) State TWO benefits to be obtained from the installation of a standard costing system.

Answer

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Tags: Direct Labour, Fixed Overhead, Material Usage, Standard Costing, Variance analysis
Level: Level 2

Topic: Standard costing and variance analysis

MA – L2 – Q17- Standard costing and variance analysis

Reconcile actual and budgeted profit using variances for GreenLeaf Organics under marginal costing.

Question

GreenLeaf Organics, based near Tamale, makes a product – the EcoShield Spray. It is an organic alternative to chemical sprays.
For the forthcoming period, budgeted fixed costs were GH₵6,000, and budgeted production and sales were 1,300 units.
The EcoShield Spray has the following standard cost:

	GH₵
Selling price	50
Materials 5 kg × GH₵4/kg	20
Labour 3 hrs × GH₵4/hr	12
Variable overheads 3 hrs × GH₵3/hr	9

Actual results for the period were as follows:
1,100 units were made and sold, earning revenue of GH₵57,200.
6,600 kg of materials were bought at a cost of GH₵29,700, but only 6,300 kg were used.
3,600 hours of labour were paid for at a cost of GH₵14,220. The total cost for variable overheads was GH₵11,700, and fixed costs were GH₵4,000.
The company uses marginal costing and values all inventory at standard cost.

Required:
(a) Produce a statement reconciling actual and budgeted profit using appropriate variances.

(b) Assuming now that the company uses absorption costing, recalculate the fixed production overhead variances.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Labour variance, Marginal Costing, Material variance, Overhead variance, Profit reconciliation, Sales variance, Variance analysis
Level: Level 2

Topic: Standard costing and variance analysis

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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.

MA – L2 – Q19 – Standard Costing and Variance Analysis

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

MA – L2 – Q18- Standard Costing and Variance Analysis

Calculate the standard quantity of material used in production for GrainWorks Plc.

MA – L2 – Q17- Standard costing and variance analysis

Reconcile actual and budgeted profit using variances for GreenLeaf Organics under marginal costing.

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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.

You're reporting an error for "MA – L2 – Q21 – 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.

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

MA – L2 – Q19 – Standard Costing and Variance Analysis

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"

MA – L2 – Q18- Standard Costing and Variance Analysis

Calculate the standard quantity of material used in production for GrainWorks Plc.

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MA – L2 – Q17- Standard costing and variance analysis

Reconcile actual and budgeted profit using variances for GreenLeaf Organics under marginal costing.

You're reporting an error for "MA – L2 – Q17- Standard costing and variance analysis"

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