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# std costing by mahaledeepak1

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std costing formula

• pg 1
```									Problem 10-13 (45 minutes)
1. a.
Actual Quantity of    Actual Quantity of     Standard Quantity
Inputs, at            Inputs, at        Allowed for Output,
Actual Price         Standard Price        at Standard Price
(AQ _ AP)             (AQ _ SP)               (SQ _ SP)
25,000 kilograms _    25,000 kilograms _    20,000 kilograms* _
\$2.95 per kilogram    \$2.50 per kilogram     \$2.50 per kilogram
= \$73,750             = \$62,500               = \$50,000

↑                      ↑                       ↑
Price Variance,
\$11,250 U
19,800 kilograms _ \$2.50 per kilogram
= \$49,500
↑
Quantity Variance,
\$500 F
*5,000 ingots _ 4.0 kilograms per ingot = 20,000 kilograms

Alternatively:
Materials Price Variance = AQ (AP – SP)
25,000 kilograms (\$2.95 per kilogram – \$2.50 per kilogram) =
\$11,250 U
Materials Quantity Variance = SP (AQ – SQ)
\$2.50 per kilogram (19,800 kilograms – 20,000 kilograms) = \$500 F
Problem 10-13 (continued)
b.
Actual Hours of        Actual Hours of           Standard Hours
Input, at the          Input, at the         Allowed for Output,
Actual Rate         Standard Rate          at the Standard Rate
(AH _ AR)              (AH _ SR)                  (SH _ SR)
3,600 hours _          3,600 hours _             3,000 hours* _
\$8.70 per hour         \$9.00 per hour             \$9.00 per hour
= \$31,320              = \$32,400                 = \$27,000

↑                     ↑                          ↑
Rate Variance,       Efficiency Variance,
\$1,080 F                 \$5,400 U

Total Variance, \$4,320 U

*5,000 ingots _ 0.6 hour per ingot = 3,000 hours

Alternatively:
Labour Rate Variance = AH (AR – SR)
3,600 hours (\$8.70 per hour – \$9.00 per hour) = \$1,080 F
Labour Efficiency Variance = SR (AH – SH)
\$9.00 per hour (3,600 hours – 3,000 hours) = \$5,400 U
Problem 10-13 (continued)
c.
Actual Hours of        Actual Hours of            Standard Hours
Input, at the           Input, at the          Allowed for Output,
Actual Rate          Standard Rate           at the Standard Rate
(AH _ AR)               (AH _ SR)                   (SH _ SR)
\$4,320              1,800 hours _              1,500 hours* _
\$2.00 per hour              \$2.00 per hour
= \$3,600                   = \$3,000

↑                        ↑                          ↑
Spending Variance,       Efficiency Variance,
\$720 U                     \$600 U

Total Variance, \$1,320 U

*5,000 ingots _ 0.3 hours per ingot = 1,500 hours

Alternatively:
Variable Overhead Spending Variance = AH (AR – SR)
1,800 hours (\$2.40 per hour* – \$2.00 per hour) = \$720 U
*\$4,320 ÷ 1,800 hours = \$2.40 per hour
Variable Overhead Efficiency Variance = SR (AH – SH)
\$2.00 per hour (1,800 hours – 1,500 hours) = \$600 U
Problem 10-13 (continued)
2. Summary of variances:
Material price variance............................. \$11,250 U
Material quantity variance ........................          500 F
Labour rate variance................................       1,080 F
Labour efficiency variance........................         5,400 U
Variable overhead spending variance.........                 720 U
Variable overhead efficiency variance ........               600 U
Net variance ........................................... \$16,390 U
The net unfavourable variance of \$16,390 for the month caused the
plant’s variable cost of goods sold to increase from the budgeted level of
\$80,000 to \$96,390:
Budgeted cost of goods sold at \$16 per ingot......... \$80,000
Add the net unfavourable variance (as above)........ 16,390
Actual cost of goods sold ..................................... \$96,390
This \$16,390 net unfavourable variance also accounts for the difference
between the budgeted net operating income and the actual net loss for
the month.
Budgeted net operating income ............................ \$15,000
Deduct the net unfavourable variance added to
cost of goods sold for the month ........................ 16,390
Net operating loss ............................................... \$(1,390)

3. The two most significant variances are the materials price variance and
the labour efficiency variance. Possible causes of the variances include:
Materials Price Variance:           Outdated standards, uneconomical
quantity purchased, higher quality
materials, high-cost method of
transport.
Labour Efficiency                   Poorly trained workers, poor quality
Variance:                          materials, faulty equipment, work
interruptions, inaccurate standards,
insufficient demand.
Problem 10-20 (60 minutes)
a. Total standard costs for swimsuits produced during June:
1,500 x \$63...................................................... \$94,500
Less standard costs of labour and overhead:
Direct labour .................................................... (24,000)
Variable overhead ............................................. (4,800)
Standard cost of materials used during June ........... \$65,700

b. Standard cost of materials used during June ........... \$65,700
Number of swimsuits produced...........................         1,500
Standard materials cost per swimsuit
(65,700÷1,500) ............................................. \$43,80
Standard metres of direct materials per
swimsuit (\$43.80÷\$8) ...................................     5.475            metres

c. Actual cost of materials used................................. \$65,000
Standard costs of materials used ........................... 65,700
Total variance................................................... \$700           F
Total materials variance........................................     \$700        F
Materials quantity variance ...................................     1,200        U
Materials price variance                                           \$1,900        F

d. Standard     variable overhead cost for June ........................             \$4,800
Standard     variable overhead rate per direct labour hour .....                      \$3
Standard     direct labour hours for June (4,800÷3)..............                  1,600
Standard     direct labour rate per hour (\$24,000÷1,600)......                       \$15

OR

Standard   labour cost/unit               =   \$24,000÷1,500              =     \$16
Standard   variable overhead/unit         =   \$63 – (\$43.80+\$16)         =   \$3.20
Standard   labour hours/unit              =   \$3.20÷\$3                   = \$1.0667
Standard   labour rate/hour               =   \$16÷1.0667                 =     \$15
Problem 10-20 (continued)
e. Actual cost per swimsuit produced
(\$63.00+\$.42) ............................................          \$     63.42
Number of swimsuits produced........................                   x 1,500.00
Total actual costs of production .......................              \$95,130.00
Less: Actual cost of materials ......................... \$65,000
Actual cost of variable overhead .............        4,860     69,860.00
Actual cost of direct labour .............................            \$25,270.00

f.   Labour rate variance       =    (AH x AR) – (AH x SR)
=    \$25,270 – (1,700 x \$15)
=    \$25,270 – 25,500
=    \$230 F

g. Efficiency variance          =    (AH x SR) – (SH x SR)
=    (1,700 x \$15) - \$24,000
=    \$1,500 U

h. Variable overhead efficiency variance         = (SH x SR) – (AH x SR)
= \$4,800 – (1,700 X \$3)
= \$300 U or \$3 (1,700 – 1,600)

i.   Variable overhead spending variance         = (AH x SR) – (AH x AR)
= \$5,100 - \$4,860
= \$240 F

j.
Standard    Standard        Standard
Quantity or    Price           Cost
Hours       or Rate
Direct materials ...................5.475 metres \$ 8/metre            \$ 43.80
Direct labour .......................1.067 hours \$15/hour               16.00
Variable overhead ................1.067 hours \$ 3/hour                   3.20
Total standard cost per                                              \$ 63.00
Problem 10-22 (25 minutes)

Direct Material Variances:

Price Variance= (Actual quantity) (Standard price – Actual price)
Amak          7,500(\$2.40 – \$2.40)            =   \$-0-
Brill         4,050 (\$4.20 – \$4.20) =              -0-
Comad         1,100 (\$5.15 – \$5.15)           =    -0-
Total material price variance                     \$-0-

Usage Variance= (Standard price) (Flexible budget quantity –
Actual quantity)
Amak \$2.40(6,840*–7,500) = \$2.40 _ –660 = –\$1,584 U
Brill  \$4.20(4,560*–4,050) = \$4.20 _ 510 =  2,142 F
Comad \$5.15(1,140*–1,100) = \$1.15 _   40 =    206 F
Total material usage variance              \$ 764 F

*Flexible budget quantity = Standard quantity allowed for actual output =
(output quantity) (standard quantity per unit of output):
Amak         11,400kg _ .6 = 6,840
Brill        11,400kg _ .4 = 4,560
Comad 11,400kg _ .1 = 1,140

Mix variance=(Standard price) (Actual input at standard mix – Actual
input at actual mix)
Amak       \$2.40(6,900*–7,500)=\$2.40 _–660 =                –\$1,440 U
Brill     \$4.20(4,660*–4,050)=\$4.20 _ 550 =                2,310 F
Comad \$5.15(1,150*–1,100)=\$5.15 _ 50                   =       258 F
Total material mix variance                                \$ 1,128 F

*Actual input at standard mix is calculated as follows:
Amak         12,650 kg _ 6/11 = 6,900
Brill        12,650 kg _ 4/11 = 4,600
Comad 12,650 kg _ 1/11 = 1,150
Problem 10-22 (continued)
Yield Variance=(Standard price)(Flexible budget quantity — Actual
input at standard mix)
Amak      \$2.40(6,840*–6,900)=\$2.40 _ –60 =                    – \$144 U
Brill     \$4.20(4,560*–4,600)=\$4.20 _ –40 =                    – 168 U
Comad \$5.15(1,140*–1,150)=\$5.15 _ –10 =                        –   52 U
Total material yield variance                                  – \$364 U

Direct Labour Variances:
Rate Variance =(Actual quantity)(Standard rate – Actual rate)
= 12,650 _ (\$5.60 – \$5.60)
= -0-

Usage Variance = (Standard price)(Flexible budget quantity –
Actual quantity)
= \$5.60 _ (12,540* – 12,650)
= \$5.60 _ –110
= –\$616 U

*Flexible budget quantity = standard quantity allowed for actual output = output quantity X
Standard quantity per unit of output = 11,400kg _ 1.1kg = 12,540kg.

The production process operated efficiently in April, except for labour. Sticky Division used
more labour than the standard allowed to achieve the actual production volume.