Standard Costing and Variance Analysis
The following standard costs apply in a business that manufactures a single product.
Standard weight to produce one unit | 12 kgs |
Standard price per kg | shs 900 |
Standard hours to produce one unit | 10 hrs |
Standard rate per hour | shs 400 |
Actual production and costs for one accounting period (when output was 290 units) were as follows:
Material used | 3,770 kgs |
Material cost | shs 3,581,500 |
Hours actually worked | 2,755 hrs |
Hours paid for | 2,900 hrs |
Wages paid | shs 1,157,100 |
Required: Calculate:
The following details were extracted from the standard cost card of a component:
Cost | Units |
---|---|
Direct Material | 2.82 kgs @ shs 480/- |
Direct Labour | 6.5 hours @ shs 375/- |
During the period actual results were as follows:
Production was 1,100 components.
Direct Material Purchase and usage: 3,200 kgs at a cost of shs. 1,510,000/-
Wages paid:
7,120 hours at sh. 2,705,600/-
Required:
Calculate all variances that have arisen.
Shown below is the standard prime cost of a tube of industrial adhesive, which is the only product manufactured in one department of Gum Plc
Materials | Industrial adhesive shs per tube | shs per tube |
---|---|---|
Powder | 1,500 | |
Chemical | 600 | |
Tube | 300 | 2,400 |
Labour Mixing and Pouring | 1,800 | |
Total Standard Prime Cost | shs 4,200 |
The standard material allowance for each tube adhesive is 2lb of powder, ¼ litre of chemical and one tube.
The standard wage rate for mixing and pouring is shs 4,500 per hour.
During the previous month 4,500 tubes of adhesive were produced, there were no work in progress. Stock at the begin and the end of the month, and receipts and issue of materials during the month are shown below:
Powder | Chemicals | Tubes | |
---|---|---|---|
Opening stock | 1,500 lbs | 200 litres | 100 tubes |
Purchases | 10,000lbs @ shs 700 | 600 ltr@ shs 2,300 600ltr @ shs 2,500 |
200 tubes@ shs 400 5,000tubes @ shs 300 |
Issues | 9,800 lbs | 1,050 litres | 4,520 tubes |
The above materials are used exclusively in the production of the adhesive and it is the policy of the company to calculate any price variance when materials are purchased
The direct employees operating the mixing and pouring plant worked a total of 2,050 hours during the previous month and earned a gross wage of shs 8,910,000.
Required to calculate:
Mto wa Mbu Inc. has set up the following standards for materials and direct labour.
Per finished batch | |
Materials 10 kgs @ shs 300 | shs 3,000 |
Direct labour 0.5 hours @ shs 2,000 | shs 1,000 |
The number of finished units budgeted for the period was 10,000; 9,810 units were actually produced
Actual results were:
Materials 98,073 kgs used
Direct Labour 4,900 hrs for shs 10,290,000.
During the month, Purchases amounted 100,000 kgs at a total cost of shs 31,000,000. Note that, Price variances are isolated upon purchases.
Required:
Show computations of all material and labour variances
The Serengeti Air Force Base, contained an extensive repair facility for jet engines. It had developed standard costing and flexible budgets for his activity.
Budgeted variable overheads at a 16,000 standard monthly direct labour hours level was shs.64,000,000. Budgeted total factory overhead at a 20,000 standard direct labour hour level was shs. 197,600,000.
The standard cost applied to repair output included a combined overhead rate of 120% of standard direct labour cost.
The total actual factory overhead cost for the month of August was shs 250,000,000 and direct labour cost actually incurred was 202,440,000.
Direct labour price variance was shs. 9,640,000 (adverse), Direct labour budget variance was shs. 14,440,000 (adverse).
The standard labour price was shs. 8,000 per direct labour hour and the denominator variance was shs.14,000,000 (favourable).
Yoou are required to compute:
The following is the operating statement for Zinet Compnay for the financial year 2019.
Favourable Variance TZS |
Adverse Variance TZS |
Total TZS |
|
---|---|---|---|
Budgeted Profit | 1,020,000 | ||
Variances: | |||
Sales Variances | |||
Sales Volume Variance | 204,000 | ||
Sales Price Variance | 960,000 | ||
Cost Variances | |||
Material Price Variance | 240,000 | ||
Material Usage Variance | 36,000 | ||
Direct Labour Rate Variance | 48,000 | ||
Direct Labour Efficiency Variance | 36,000 | ||
Variable Overhead Efficiency Variance | 18,000 | ||
Variable Overhead Expenditure Variance | 144,000 | ||
Fixed Overhead Expenditure Variance | 600,000 | ||
Fixed Overhead Volume Variance | 36,000 | ||
Total Variances | 876,000 | 1,446,000 | (570,000) |
Actual Profit | 450,000 |
The budgeted data for the year 2019 has the following
TZS | Quantity | |
---|---|---|
Sales Volume in Units | 360 | |
Production Volume in Units | 360 | |
Direct Material Purchase in Kgs | 180 | |
Direct Materials Consumed in Kgs | 180 | |
Direct Labour Hours | 270 | |
Sales Revenue | 4,800,000 | |
Material Costs | 1,080,000 | |
Direct Labour Costs | 1,080,000 | |
Variable Overhead Costs | 540,000 | |
Fixed Overhead Costs | 1,080,000 |
The following additional information is also available:
The actual sales revenue was TZS 2,880,000
Direct Materials purchased were 240 Kgs
It is assumed that inventory of raw materials and finished goods are valued at standard costs.
Actual production volume in units was 372 units.
Required: Calculate the following:
Mojawapo is one of the recently started businesses dealing with fresh juice. Below is the standard mix for producing 9 litres of juice. A standard loss of 10% of input is expected:
Liquid | Quantity (litres) | Price per litre T.shs | Amount T.shs |
---|---|---|---|
Lemon | 5 | 7 | 35 |
Ginger | 3 | 5 | 15 |
Water | 2 | 2 | 4 |
Total | 10 | 54 |
Actual input for the month of April 2020 were as follows:
53,000 | Litres of Liquid Lemon at T.shs 7 @ litre | 371,000 |
28,000 | Litres of Liquid Ginger at T.shs 5.30 @ litre | 148,400 |
19,000 | Litres of Liquid Water at T.shs 2.20 @ litre | 41,800 |
100,000 | Total | 561,200 |
Actual output of Juice for the month of April 2020 was 92,700 litres.
Required:
The standard data of product X is given below:
Direct material cost 16 kgs @ T.shs 600 T.shs 9,600 and
Direct labour cost 6 hour @ T.shs 1,200 T.shs 7,200.
The production control department reported the following variances with relation to product X.
Direct Material Price T.shs 1,884,000 [F]
Direct Material Usage T.shs 4,800 [A]
Direct Labour Rate T.shs 105,980 [A]
Direct Labour Efficiency T.shs 84,780 [F]
Actual direct wages cost T.shs 1,713,200 and T.shs 550 was paid for each kilogram of direct material. There was no opening or closing stock of materials
Required
Calculate the following:
ABC Company has been experiencing adverse Variances in its performance. In search of the solution, Dr. Sarah, a Company Director of Finance has recommended investigations on the causes of variance. The management accountant is skeptical about investigating the variances on the ground that, if causes of variance are out of control, it will require additional cost to correct them. The management accountant concluded that, “We cannot afford doing the investigation now”. The director has engaged you as an independent consultant and has provided you with the following information:-
Shomile Company has just completed its operations for the month of October 2020. The total standard cost for all activities during October is given below:
Costs Item | Total standard cost T.shs |
---|---|
Direct Materials | 5,000,000 |
Direct Labour | 9,000,000 |
Variable Factory Overhead | 6,000,000 |
20,000,000 |
Variances from standards were analysed, and recorded as given below:
Favourable T.shs | Adverse T.shs |
|
---|---|---|
Materials Price Variance | 200,000 | |
Labour Rate Variance | 150,000 | |
Labour Efficiency Variance | 300,000 | |
Material Usage Variance | 100,000 | |
Overhead Price Variance | 300,000 | |
Overhead Efficiency Variance | 200,000 |
REQUIRED: Compute the Actual cost incurred during the month of October 2020 for:
The following information is available from the records of rubber processing Company which follows standard costing system for the month of December, 2020.
T.shs | |
Materials Purchased: 10,000 pieces @ T.shs 220 each | 2,200,000 |
Materials Consumed: 9,500 pieces @ T.shs 220 each | 2,090,000 |
Actual wages paid: 2,475 hours @ T.shs 250 each | 618,750 |
Factory overhead incurred | 1,100,000 |
Factory overhead budgeted | 1,000,000 |
Units produced | 900 units |
Selling price | T.shs 5,000 per unit |
Standard rates and prices are as follows:
Direct Materials rate per unit T.shs 200
Standard input per unit (pieces) 10
Direct labour rate per hour T.shs 200
Standard requirements per unit (hours) 2.5
Overheads per labour hour T.shs 400.
REQUIRED: Compute:
Lala has been given the following information regarding production of a certain product:
Standard Fixed Overhead cost per Direct Labour Hour T.shs 1,500
Standard Direct Labour Hour per unit 2 hours
Budgeted production 400 units
Actual production 360 units
Actual Direct Labour Hours worked 780 hours
Actual cost incurred T.shs 13,800,000.
REQUIRED:
The budget for one month of Victoria Ulul Corporation for the month of April 2021 includes the following labour costs:
To produce 5,000 units of product X, the following labour charges are required:
Grade One 3,600 hours at T.shs 400 T.shs 1,440,000
Grade Two 2,800 hours at T.shs 300 T.shs 840,000
Actual production and direct labour charges were as follows:
6,000 units of product X were produced,
Grade One 3,000 hours at T.shs 400 T.shs 1,200,000
Grade Two 5,000 hours at T.shs 320 T.shs 1,600,000
REQUIRED: Calculate the direct labour cost variance for April 2021 and analyse it into rate, efficiency, mix and productivity variance using budgeted weighted average contribution method.
Saragana Corporation operates a system of standard costing, which it uses amongst other things as the basis of calculating certain management bonuses.
In December 2020, the company’s production of 100,000 crates was in accordance with the budget. The standard quantity of material used in each crate is 1 kilogram, the standard price is T.Shs 500 per Kg. In December 2020, 105,000 kilograms of material were used, at an actual purchase price of T.shs 450,000 per thousand kilograms, (which was also the replacement cost).
The material buyer is given a bonus of 10% on any favourable material price variance. The production manager is as well given a bonus of 10% on any materials favourable quantity variance.
REQUIRED: Calculate the materials cost variance for December 2020.