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std costing by mahaledeepak1

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std costing formula

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									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
      swimsuit...........................
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.
(SMAC Solution, adapted)

								
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