CHAPTER 8 STANDARD COSTING & VARIANCE ANALYIS

Exercise 1

1. Determine the material purchase price and quantity variances.

Material price variance:

100,000 P2.50 = P250,000

100,000 P2.60 = 260,000

P 10,000 F

Material quantity variance:

95,625 P2.60 = P248,625

89,250 P2.60 = 232,050

P 16,575 U

2. Determine the labor rate and efficiency variances.

Labor rate variance:

122,400 P8.35 = P1,022,040

122,400 P8.50 = 1,040,400

P 18,360 F

Labor efficiency variance:

122,400 P8.50 = P1,040,400

127,500 P8.50 = 1,083,750

P 43,350 F

Exercise 2

1. Two variance method

Actual (P6,400 + P17,500) P23,900

Budget Variance: P240 U

BFOH (8,900 P1.90) P16,910

VOH (1,800 5 P.75) 6,750 P23,660

Volume Variance: P190 F

Applied OH:

(1,800 5 P2.65) P23,850

2. Three variance method

Actual P23,900

Spending Variance: P315 U

Flexible Budget Based on Actual Input

BFOH P16,910

VOH (8,900 P.75) 6,675 P23,585

Efficiency Variance: P75 F Flexible Budget Based on Standard DLHs

BFOH P16,910

VOH (1,800 5 P.75) 6,750 P23,660

Volume Variance: P190 F

Applied OH:

(1,800 5 P2.65) P23,850

3. Four variance method

Actual VOH P6,400

Variable Spending Variance: P275 F

Flex. Bud. Based on Actual

Input Hours (8,900 P.75) P6,675

Variable Efficiency Variance: P75 F

Applied VOH

(1,800 5 P.75) P6,750

Actual FOH P17,500

FOH Spending Variance: P590 U BUDGETED FOH

P16,910

FOH Volume Variance: P190 F

Applied FOH

(1,800 5 P1.90) P17,100

Exercise 3

a. actual material cost P314,000

actual pieces at standard cost (80,000 P4) 320,000

material purchase price variance P 6,000 F

b. 3,900 units 20 pieces per unit = 78,000 standard quantity allowed

c. total standard cost of material (78,000 P4) P312,000

d. standard cost of actual material used

P312,000 + P6,400 U quantity variance P318,400

P318,400 P4 = 79,600 actual pieces used

e. actual labor cost P40,120

5,900 actual direct labor hours P6 35,400

labor rate variance P 4,720 U

f. 3,900 units 1.5 standard hours per unit 5,850 SHA

g. 5,850 Std Hours Allowed P6 P35,100

h. actual hours standard rate (from e) P35,400

standard cost of labor allowed (from g) 35,100

labor efficiency variance P 300 U

i. actual machine hours standard VOH rate (18,900 P2.50) P47,250

VOH spending variance 50 U

actual VOH P47,300

j. 3,900 units 4.8 standard hours per unit = 18,720 MH allowed

k. standard hours allowed (from j) standard VOH rate

(18,720 P2.50) P46,800

actual machine hours standard rate (from i)

(18,900 P2.50) 47,250

variable overhead efficiency variance P 450 U

l. 19,000 machine hours P3 P57,000

m. 3,900 units 4.8 hours per unit P3.00 P56,160

n. actual fixed overhead P60,000

budgeted fixed overhead (from l) 57,000

fixed overhead spending variance P 3,000 U

o. budgeted fixed overhead (from l) P57,000

applied fixed overhead (from m) 56,160

volume variance P 840 U

p. total actual overhead P107,300

[P60,000 + P47,300 (from i)]

total applied overhead (18,720 SHA P5.50) 102,960

Total overhead variance P 4,340 U

Exercise 4

a. Total direct material cost variance.

= Actual direct material cost Standard direct material cost = (1,900 lbs x P41) (8,000 x 0.25 x P40) ; = P77,900 - P80,000 ; = P2,100 favorable

b. Direct material price variance.

= (AP SP) x AQ ; = (P41 - P40) x 1,900 lbs = P1,900 unfavorable

c. Direct material quantity variance.

= (AQ SQ) x SP; = [1,900 lbs - (8,000 x 0.25)] x P40 = P4,000 favorable

d. Total direct labor cost variance.

= Actual direct labor cost Standard direct labor cost = (250 x P18.25) (8,000 x 0.03 x P18) ; = P4,562.50 - P4,320.00 = P242.50 unfavorable

e. Direct labor rate variance.

= (AR SR) x AH ; = (P18.25 - P18.00) x 250 = P62.50 unfavorable

f. Direct labor efficiency variance.

= (AH SH) x SR ; = [250 - (8,000 x 0.03)] x P18 = P180.00 unfavorable

Exercise 5

a. Master Flexible Actual

Budget Budget Results

Sales volume (in units) 30,000 25,000 25,000

Sales revenues P3,600,000 P3,000,000 P3,000,000

Flexible (variable) costs 2,160,000 P1,800,000 1,930,000

Contribution margin 1,440,000 P1,200,000 1,070,000

Capacity-related (fixed) costs 900,000 P 900,000 970,000

Operating profit P 540,000 P 300,000 P 100,000

b. Determine the flexible (variable) cost variance.

= Actual cost Flexible budget cost ; = P1,930,000 - P1,800,000 = P130,000 unfavorable

c. Determine the flexible (variable) planning variance.

= Flexible budget cost Master budget cost ; = P1,800,000 P2,160,000 = P360,000 less than planned

d. As these results suggest, the manager should not be congratulated for keeping costs under control.

Flexible (variable) costs were P130,000 over budget for actual output and capacity-related (fixed) costs

were also P70,000 over budget. These variances from the flexible budget highlight the amounts that are

different than planned. Since variances simply signal a deviation from what was planned, these differences

need to be investigated before corrective actions can be taken.

Exercise 6

MATERIAL QUANTITY VARIANCE

A (181,000 172,200) P0.06 = P 528 UNF

B (33,000 28,700) P0.12 = 516 UNF

C (6,000 4,100) P0.25 = 475 UNF

P1,519

Act Q x Act Mix x Std P Act Q x Std Mix x Std P Act Q x

Std Mix x Std P

A 181,000 P0.06 = P10,860 184,800 P0.06 = P11,076 172,200 P0.06 = P10,332

B 33,000 P0.12 = 3,960 30,800 P0.12 = 3,696 28,700 P0.12 = 3,444

C 6,000 P0.25 = 1,500 4,400 P0.25 = 1,100 4,100 P0.25 = 1,025

P16,320 P15,872 P14,801

MIX VARIANCE = P 436 UNF

YIELD VARIANCE = P1,083 UNF

Total P1,519 UNF

Exercise 7

(AH x AM X SR) x (AH x SM x SR ) x (SH x SM x SR )

MIX VARIANCE YIELD VARIANCE

A 5,400 P4 = P21,600 6,000 P4 = P24,000 5,880 P4 = P23,520

B 3,200 P6 = 19,200 3,000 P6 = 18,000 2,940 P6 = 17,640

C 1,300 P8 = 10,400 1,000 P8 = 8,000 980 P8 = 7,840

D 100 P10 = 1,000 P50,000 P49,000

P52,200

MIX VARIANCE = P2,200 UNF

YIELD VARIANCE = P1,000 UNF

RATE VARIANCE = P 800 UNF (P53,000 P52,200)

Exercise 8

TOTAL COST EQUATION = P80,000 FIXED + P20,000 / 10,000 = P2 variable per dlh

a. 120% = P80,000 + (12,000 P2) = P104,000

100% = P80,000 + (10,000 P2) = P100,000

80% = P80,000 + ( 8,000 P2) = P 96,000

60% = P80,000 + ( 6,000 P2) = P 92,000

APPLICATION RATE = P100,000 / 10,000 dlh = P10 per dlh

Volume variance = fixed oh rate x difference in normal or planned and actual units produced.

P80,000 / 10,000 = P8 per dlh

. 120% = (12,000 10,000 = 2,000 P8) = P16,000

100% = (10,000 10,000 = 0 P8) = P0

80% = ( 8,000 10,000 = -2,000 P8) = - P 16,000

60% =( 6,000 10,000 = - 4,000 P8) = - P 32,000

b. BUDGET VARIANCE = ACTUAL FOH BUDGETED FOH

P9,000 FAV = P87,000 P96,000

Exercise 9

1. Applied rate = P6/dlh

Total Overhead Cost = P50,000 + P1/dlh

Std Overhead (A) 5,000 2 = 10,000

(B) 5,000 4 = 20,000

Std Hrs. 5,000 2 = 10,000

2. a. 1. (P7.20 P7.00) 12,000 = P2,400 U

2. (P3.90 P4.00) 20,000 = 2,000 F

P 400 U

b. 1. (10,500 10,000) P7.00 = P3,500 U

2. (19,800 20,000) P4.00 = 800 F

P2,700 U

c. P79,380 (9,800 P8) = P980 U

d. (9,800 10,000) P8 = P1600 F

e. (10,000 10,000) P5 = 0

f. (9,800 10,000) P1 = P200 F

g. Fix Spd P48,100 P50,000 = P1,900 F

Var Spd P21,000 (9,800 P1) = P11,200 U

Exercise 10

STD Q A 120,000 3 = 360

1,000

B 120 6 = 720

C 120 9 = 1,080

ACT HRS ACT HRS STD HRS

ACT MIX STD MIX STD MIX

STD P STD P STD P

MIX VARIANCE YIELD VARIANCE

A 390 P4.50 = P1,755 390 P4.50 = P1,755 360 P4.50 = P1,620

B 980 P4.00 = P3,920 780 P4.00 = P3,120 720 P4.00 = P2,880

C 970 P3.00 = P2,910 1,170 P3.00 = P3,510 1,080 P3.00 = P3,240

P8,585 P8,385 P7,740

P200 UNF P645 UNF

Test I MULTIPLE CHOICE

1 D 13 C 25 C 37 A

2 B 14 A 26 B 38 B

3 D 15 B 27 A 39 A

4 A 16 B 28 C 40 A

5 D 17 C 29 B 41 B

6 C 18 C 30 A 42 D

7 B 19 A 31 D

8 A 20 B 32 A

9 C 21 A 33 C

10 C 22 D 34 A

11 B 23 B 35 B

12 A 24 C 36 A

Test II MULTIPLE CHOICE

1 A 13 D 25 B

2 D 14 B 26 D

3 C 15 C 27 D

4 D 16 D 28 B

5 D 17 D 29 D

6 D 18 C 30 D

7 A 19 B 31 C

8 B 20 C

9 A 21 B

10 C 22 D

11 C 23 C

12 D 24 A