Direct materials variances
Exercise 1. Direct materials variances. ABC Company produced and sold 23,400 units. For production, it purchased
and used 260,000 ounces of ingredients that costs a total of Php10,400. The standard cost for direct materials are: (1) 10
oz. per unit and (2) 0.05 per oz.
Required:
1. Determine the direct materials price variance. Php2,600 F
2. Determine the direct materials quantity variance. Php1,300 UF
3. Determine the spending variance (price variance and quantity variance). Php1,300 F
Direct labor variances
Exercise 2. Direct labor variances. DEF Company produced 25,200 units. Direct labor hours used during production
was 2,800 hours and the Company incurred total direct labor cost of Php28,700. The standard rate for labor was Php10
per hour and the standard hours needed to finish one unit was 0.10 hours.
Required: Determine the following:
1. The direct labor rate variance (same as price variance). Php700 U
2. The direct labor efficiency variance (same as quantity variance). Php2,800 U
3. The direct labor spending variance. Php3,500 U
Exercise 3. Variable manufacturing overhead variance. GHI Company produced 36,000 units. Direct labor hours
totalled 4,000 hours to produce the units. Actual variable overhead costs amounted to Php3,600. The variable
manufacturing overhead is applied at Php1.00 per direct labor hour and the standard number of hours to produce one unit
is 0.10 hours.
Required: Determine the following:
1. The variable overhead spending variance. Php400F
2. The variable overhead efficiency variance. Php400UF
Exercise 4. Comprehensive. Bianca Company produces a single product. The standard cost card for the product follows:
Direct materials (4 yards @ Php6 per yard) Php24
Direct labor (1.80 hours @ Php11 per hour) 19.80
Variable manufacturing overhead (1.80 hours @ Php5.20 per 9.36
hour)
During a recent period, the company produced 1,800 units. Various costs associated with the production of these units
are given below:
Direct materials purchased (7,200 yards) Php42,750
Direct materials used in production 7,500 yards
Direct labor cost incurred (2,940 hours) Php28,560
Variable manufacturing overhead cost incurred 15,120
Required: Determine all related variances.
1. DM Price variance. Php450 F
2. DM Quantity variance. Php1,800 UF
3. Labor rate variance. Php3,780 F
4. Labor efficiency variance. Php3,300 F
5. VOH rate variance. Php168 F
6. VOH efficiency variance. Php1,560 F
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Standard Costing and Variance Analysis
Exercise 5. FOH variances. MM Corporation has the standard of using 1.5 hours of machine time at a Php30 rate per
hour to produce 1 unit. The predetermined overhead rate was developed using a capacity of 6,000 units per year.
Production is assumed to occur evenly throughout the year.
During one month, the Company produced 525 units. Actual fixed overhead cost incurred amounted to Php22,800 for
800 hours of machine time.
Required: Determine all related variances.
1. Determine the FOH spending variance. Php300 U
2. Determine the FOH volume variance. Php1,125 F
Exercise. Comprehensive. ABC Company has the following standards for one unit of product:
Direct material: 96 pounds * Php7.20 Php691.20
Direct labor: 3.6 hours * Php20 72
Variable overhead: 1.5 hours of machine time * Php60 108
Fixed overhead: 1.5 hours of machine time * Php36 64.80
The predetermined overhead rates were developed using a capacity of 7,200 units per year. Production is assumed to
occur evenly throughout the year.
During July 2016, the company produced 630 units. Actual data for the month are as follows:
Direct material purchased: 54,000 pounds @ Php7.10
Direct material used: 60,600 pounds (all from July purchases)
Total labor cost: Php29,000 for 1,800 hours
Variable overhead incurred: Php52,500 for 960 hours of machine time
Fixed overhead incurred: Php27,300 for 960 hours of machine time
Required:
1. Direct material variances (price and quantity variances). Php5,400 F ; Php864 U
2. Labor variances (rate and efficiency variances). Php7,000 F ; Php9,360 F
3. VOH variances (spending and efficiency variances). Php5,100 F ; Php900 U
4. FOH variances (spending and volume variances). Php5,100 F ; Php1,620 F
5. Present total overhead variance analysis using one-, two-, and three-variance approaches.
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Standard Costing and Variance Analysis
Illustrative Problem. CRUISE Inc. has the following standards for one unit of product:
Direct material: 320 pcs * Php24 Php7,680
Direct labor: 12 hours * Php64 768
Variable overhead: 6 hours of machine time * Php200 1,200
Fixed overhead: 6 hours of machine time * Php120 720
TOTAL PhP10,368
The predetermined overhead rates were developed using a capacity of 6,000 units per year. Production is assumed to
occur evenly throughout the year.
During January 2017 (first month of operations), the company produced 525 units. Actual data for the month are as
follows:
Direct material purchased: 180,000 pcs @ Php23
Direct material used: 172,000 pcs
Total labor cost: Php398,040 for 6,200 hours
Variable overhead incurred: Php672,000 for 3,200 hours of machine time
Fixed overhead incurred: Php364,800 for 3,200 hours of machine time
Required:
1. Direct material variances (price and quantity variances). U
2. Labor variances (rate and efficiency variances).,360 F
3. VOH variances (spending and efficiency variances). U
4. FOH variances (spending and volume variances). 620 F
5. Present total overhead variance analysis using one-, two-, and three-variance approaches.
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Standard Costing and Variance Analysis
