JOANN R.
SALOMON COST ACCOUNTING
BSA IVX
Standard Costing and Variance Analysis Problems & Solution:
The scenario of STD costing and variance analysis.
http://www.accountingformanagement.com/standard_costing_system_solved_problems.htm
Problem 1:
Materials Variance Analysis:
The Schlosser Lawn Furniture Company uses 12 meters of aluminum pipe at ₱0.80 per
meter as standard for the production of its Type A lawn chair. During one month's
operations, 100,000 meters of the pipe were purchased at ₱0.78 a meter, and 7,200 chairs
were produced using 87,300 meters of pipe. The materials price variance is recognized
when materials are purchased.
Required: Materials price and quantity variances.
Solution:
Meters of pipe Unit Cost Amount
Actual quantity purchased 100,000 ₱0.78 actual ₱78,000
actual quantity purchased 100,000 ₱0.80 standard ₱80,000
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Materials purchase price variance 100,000 ₱ (0.02) ₱ (2,000) fav.
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Actual quantity used 87,300 0.80 standard ₱69,840
Standard quantity allowed 86,400 0.80 standard ₱69,120
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Materials quantity variance 900 0.80 ₱720 Unfav.
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JOANN R. SALOMON COST ACCOUNTING
BSA IVX
Problem 2:
Labor Variance Analysis:
The processing of a product requires a standard of 0.8 direct labor hours per unit for Operation 4-802 at
a standard wage rate of ₱6.75 per hour. The 2,000 units actually required 1,580 direct labor hours at a
cost of ₱6.90 per hour.
Required: Calculate:
labor rate variance or Labor price variance.
Labor efficiency or usage or quantity variance.
Solution:
Time Rate Amount
Actual hours worked 1,580 ₱6.90 actual ₱10,902
Actual hours worked 1.580 ₱6.75 standard 10,665
-------- -------- --------
Labor rate variance 1,580 ₱0.15 ₱237 unfav.
===== ===== =====
Actual hours worked 1,580 ₱6.75 standard ₱10,665
Standard hours allowed 1,600 ₱6.75 standard ₱10,800
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Labor efficiency variance (20) 6.75 standard ₱ (135) fav.
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JOANN R. SALOMON COST ACCOUNTING
BSA IVX
Problem 5:
Variance Analysis:
On May 1, Bovar Company began the manufacture of a new mechanical device known a "Dandy." The
company installed a standard cost system in accounting for manufacturing costs. The standard costs
for a unit of Dandy are:
Materials: 6 lbs. at ₱1 per lb. ₱6.00
Direct labor: 1 hour at ₱4 per hour ₱4.00
Factory overhead: 75% of direct labor cost ₱3.00
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Total ₱13.00
======
The following data were obtained from Bovar's record for may:
Actual production of Dandy 4,000 units
Units sold of Dandy 2,500
Sales ₱50,000
Purchases (26,000 pounds) 27,300
Materials price variance (applicable to May purchase) ₱1,300 unfavorable
Materials quantity variance 1,000 unfavorable
Direct labor rate variance 760 unfavorable.
Direct labor efficiency variance 800 favorable
Factory overhead total variance 500 unfavorable
Required:
1. Standard quantity of materials allowed (in pounds).
2. Actual quantity of materials used (in pounds).
3. Standards hours allowed.
4. Actual hours allowed.
5. Actual direct labor rate.
6. Actual total factory overhead.
Solution:
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JOANN R. SALOMON COST ACCOUNTING
BSA IVX
Actual production 4,000 units
Standard materials per unit 6 pounds
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Standard quantity of materials allowed 24,000 pounds
=======
Standard quantity of materials allowed 24,000 pounds
Unfavorable materials quantity variance (₱1,000 variance / ₱1 standard price per pound) 1,000 pounds
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Actual quantity of materials used 25,000 pounds
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Actual production 4,000 units
Standard hours per unit 1 hour
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Standard hours allowed 4,000 hours
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Standard hours allowed 4,000 hours
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