MS-14: STANDARD COSTING AND VARIANCE ANALYSIS

1. The data below relate to a product of Salois Company.

Standard costs:
Materials, 2 pounds at P 6 per pound
Labor, 3 hours at P 15 per hour
Variable overhead at P 8 per labor hour
Budgeted fixed production costs
Budgeted production for the year

P12
P45
P24
P140,000
4,000

Actual results were:

Production
Material purchases, 8,000 pounds
Labor, 10,360 hours
Variable overhead incurred
Fixed overhead incurred
Material used in production

3,700 units
P 46,400
P160,580
P 84,700
P137,500
7,300 pounds

per unit
per unit
per unit
per year
units

For each variance, determine the amount and effect on net income.
a.
Material price variance.
b.
Material use variance.
c.
Direct labor rate variance.
d.
Direct labor efficiency variance.
e.
Variable overhead budget variance.
f.
Variable overhead efficiency variance.
g.
Fixed overhead budget variance.
2.

Toimi Inc. had the following variances for the most recent month:
Materials Price Variance
Materials Usage Variance
Direct Labor Rate Variance
Direct Labor Efficiency Variance

P3,500 U
P 720 F
P5,770 F
P6,980 U

Other information included: actual wages paid P72,310; materials purchased P130,760; standards per unit were
2 labor hours at P5 per hour, 3 pounds at P6 per pound. There were no changes in materials inventories.
a.
b.
c.
d.
e.
3.

Find the units produced.

Find the standard labor hours.
Find the actual labor hours.
Find the standard quantity of materials allowed.
Find the actual quantity of materials used.

Ralph Inc. had the following variances for the most recent month:
Direct Labor Rate Variance
Direct Labor Efficiency Variance
Variable Overhead Spending Variance

P14,560 U
P 3,660 U
P12,320 F

Other information included: actual wages paid P105,560; materials purchased P124,860; standards per unit
were 2 labor hours at P5 per hour and variable overhead at P6 per hour.
a.
b.
c.
d.
e.
4.

Find the units produced.

Find the standard labor hours.
Find the actual labor hours.
Find the variable overhead efficiency variance.
Find the actual variable overhead.

Everjoice Company makes clocks. The fixed overhead costs for 2013 total $720,000. The company uses direct
labor-hours for fixed overhead allocation and anticipates 240,000 hours during the year for 480,000 units. An
equal number of units are budgeted for each month. During June, 42,000 clocks were produced and P63,000
were spent on fixed overhead.

Required:
a. Determine the fixed overhead rate for 2013 based on units of input.
b. Determine the fixed overhead static-budget variance for June.
c. Determine the production-volume overhead variance for June.
5.

Different management levels in Bates, Inc., require varying degrees of managerial accounting information.
Because of the need to comply with the managers' requests, four different variances for manufacturing overhead
are computed each month. The information for the September overhead expenditures is as follows:
Budgeted output units
Budgeted fixed manufacturing overhead
Budgeted variable manufacturing overhead
Budgeted direct manufacturing labor hours
Fixed manufacturing costs incurred
Direct manufacturing labor hours used
Variable manufacturing costs incurred
Actual units manufactured

3,200 units
P20,000
P5 per direct labor hour
2 hours per unit
P26,000
7,200
P35,600
3,400

Required:
a. Compute a 4-variance analysis for the plant controller.
b. Compute a 3-variance analysis for the plant manager.
c. Compute a 2-variance analysis for the corporate controller.
d. Compute the flexible-budget variance for the manufacturing vice president.
6.

A company produces a gasoline additive. The standard costs and input for a 500-liter batch of the additive are
presented below.
Chemical
Echol
Protex
Benz
CT-40

Standard InputQuantity in Liters

200
100
250
50
600

Standard Cost
per Liter
P0.200
0.425
0.150
0.300

Total
Cost
P 40.00
42.50
37.50
15.00
P135.00

The quantities purchased and used during the current period are shown below. A total of 140 batches were
made during the current period.
Quantity PurTotal
chased (Liters)
Purchase Price
25,000
P 5,365
13,000
6,240
40,000
5,840
7,500
2,220
85,500
P 19,665
What is the materials mix variance for the operation?
What is the materials yield variance for this operation?

Quantity Used
(Liters)
26,600
12,880
37,800
7,140
84,420

Chemical
Echol
Protex
Benz
CT-40

7.

Harrigan Corporation uses two materials in the production of their product. The materials, A and B, have the
following standards:
Material
A
B
Yield

Standard Mix
3,500 units
1,500 units
4,000 units

Standard Unit Price

P1.00 per unit
3.00 per unit

Standard Cost
P3,500
P4,500

During January, the following actual production information was provided:

Material
A
B
Yield
a.
b.
c.

Actual Mix
30,000 units
20,000 units
36,000 units

What is the materials mix variance?

What is the materials yield variance?
What is the materials usage variance?
2

8.

Landeau Manufacturing Company has a process cost accounting system. A monthly analysis compares actual
results with both a monthly plan and a flexible budget. Standard direct labor rates used in the flexible budget are
established at the time the annual plan is formulated and held constant for the entire year. Standard direct labor
rates in effect for the fiscal year ending June 30 and standard hours allowed for the output in April are

Labor class III

Labor class II
Labor class I

Standard DL Rate per Hour

P8.00
7.00
5.00

Standard DLH Allowed for Output

500
500
500

The wage rates for each labor class increased on January 1 under the terms of a new union contract negotiated
in December of the previous fiscal year. The standard wage rates were not revised to reflect the new contract.
The actual direct labor hours (DLH) worked and the actual direct labor rates per hour experienced for the month
of April were as follows:
Actual Direct Labor
Labor class III
Labor class II
Labor class I

Actual Rate per Hour

P8.50
7.50
5.40

Direct Labor Hours

550
650
375

What is the labor yield variance for Landeau in April (rounded)?

What is the labor mix variance for Landeau in April?
9.

Redd Co. uses a standard cost system for its production process and applies overhead based on direct labor
hours. The following information is available for August when Redd made 4,500 units:
Standard:
DLH per unit
Variable overhead per DLH
Fixed overhead per DLH
Budgeted variable overhead
Budgeted fixed overhead
Actual:
Direct labor hours
Variable overhead
Fixed overhead
a.
b.
c.
d.
e.
f.
g.
h.
i.

j.

2.50
P1.75
P3.10
P21,875
P38,750
10,000
P26,250
P38,000

Using the one-variance approach, what is the total overhead variance?

Using the two-variance approach, what is the controllable variance?
Using the two-variance approach, what is the non-controllable variance?
Using the three-variance approach, what is the spending variance?
Using the three-variance approach, what is the efficiency variance?
Using the three-variance approach, what is the volume variance?
Using the four-variance approach, what is the variable overhead spending variance?
Using the four-variance approach, what is the variable overhead efficiency variance?
Using the four-variance approach, what is the fixed overhead spending variance?
Using the four-variance approach, what is the volume variance?