Standard Costing

Klineline Board Manufacturing Company manufactures a single product. The standard cost of
one unit of this product is as follows:

 Direct materials : 6 feet at Tk. 1.00 Tk. 6.00

 Direct labour : 1 hour at Tk. 4.50 Tk. 4.50
 Variable manufacturing overhead : 1 hour at Tk. 3.00 Tk. 3.00
 Total standard variable cost per unit Tk. 13.50

During October, 6,000 units were produced. Selected cost data relating to the month’s production
follow:

 Material purchased : 60,000 feet at Tk. 0.95 Tk.57,000

 Material used in production : 38,000 feet ------
 Direct labour : 6,500 hours at Tk. 4.30 per hour Tk.27,950
 Variable manufacturing cost incurred Tk.20,475
 Variable manufacturing overhead efficiency variance Tk.1,500 (Un)

There was no beginning inventory of raw materials. The variable manufacturing overhead rate is
based on direct labour hours.

Required:

(a) For direct materials:

1) Compute the price and quantity variance for October;
2) Prepare journal entries to record activity for October;
(b) For direct labour:
1) Compute the rate and efficiency variances for October;
2) Prepare journal entry to record activity for October.
(c) For variable manufacturing overhead:
1) Compute the spending variance for October, and verify the efficiency variance given
above.
(d) State possible causes of each variance that you have computed.

-CMA, April-2011
Standard Costing

Dynamic Company manufactures a complete line of radios. Because a large number of models
have plastic cases, the company has its own molding department for producing them. The month
of April was devoted to the production of the plastic case for one of the portable radios Model
SX76.

The Molding Department has two operations molding and trimming; there usually is no
interaction of labor in these two operations. The standard labor cost for producing 10 plastic
cases for Model SX76 is as follows:

 Molding: ½ hour @ Tk.6 Tk.3.00

 Trimming: ¼ hour @ Tk.4 Tk.1.00
Tk.4.00

During April, 70000 plastic cases were produced in the Molding Department; however, 10% of
these cases had to be discarded because they were found to be defective at final inspection. The
Purchasing Department had changed to a new plastic supplier to take advantage of a lower price
for comparable plastic. The new plastic turned out to be of a lower quality, resulting in the
rejection of the 7000 cases.

Direct labor hours worked and direct labor costs charged to the Molding Department are as
follows:

 Molding: 3800 hours @Tk.6.25 Tk.23750

 Trimming: 1600 hours @ Tk.4.15 Tk.6640
 Total labor charges Tk.30390

As a result of poor scheduling by the Production Scheduling Department, the supervisor of the
Molding Department had to shift molders to the trimming operations for 200 hours during April.
The company paid the molding workers their regular hourly rate, even though they were
performing a lower-rated task. There was no significant loss of efficiency caused by the shift. In
addition, as a result of unexpected machinery repairs required during the month, 75 hours and 35
hours of idle time occurred in the molding and trimming operations, respectively.

The monthly report which compares actual costs with standard cost of output for April shows the
following labor variance for the Molding Department:

 Actual labor cost for April Tk.30390

 Standard labor cost of output {63000 x (Tk.4/10)} Tk.25200
 Unfavorable labor variance Tk.5190

This variance is significantly higher than normal.

1
Required:

1) Prepare a detailed analysis of the unfavorable labor variance for the Molding Department,
showing the variance resulting from:-
(a) labor rates;
(b) labor substitution;
(c) material substitution;
(d) operating efficiency;
(e) Idle time.
2) Evaluate the Molding Department supervisor’s argument that the variances due to labor
substitution and change in raw materials should not be charged to the department

-CMA, August-2011

2
Standard Costing

Alex Foods manufactures apple products such as apple, jelly and applesauce. It makes
applesauce by blending Tolma, Golden and Ribson apples. Budgeted costs to produce 100,000
kg of applesauce in November are as follows:

o 45,000 kg of Tolman apples @Tk.30 per kg Tk.13,50,000

o 180,000 kg of Golden apples @Tk.26 per kg Tk.46,80,000
o 75,000 kg of Ribson apples @Tk.22 per kg Tk.16,50,000

Actual costs in November are:

o 62,000 kg of Tolman apples @Tk.28 per kg Tk.17,36,000

o 155,000 kg of Golden apples @Tk.26 per kg Tk.40,30,000
o 75,000 kg of Ribson apples @Tk.20 per kg Tk.18,60,000

Required:

(i) Calculate the total direct materials price and efficiency for November.
(ii) Calculate the total direct materials mix and yield variances for November.
(iii)Comment on your results in requirement 1 and 2.

-CMA, December-2011
Standard Costing

XYZ, a business house, sells five different types of products, namely, A, B, C, D and E. The
budgeted and actual operating data of five products for the month of August 2011 were as
follows:

Product Selling Price/kg (Tk.) Variable Cost/kg (Tk.) Sales volume in kg

A 90.00 50.00 45,000
B 100.00 54.00 25,000
C 110.00 58.00 10,000
D 120.00 60.00 5,000
E 130.00 68.00 15,000
100,000

Actual for August 2011:

Product Selling Price/kg Tk.) Variable Cost/kg (Tk.) Sales volume in kg

A 90.00 52.00 57,600
B 104.00 58.00 18,000
C 110.00 56.00 9,600
D 120.00 68.00 13,200
E 140.00 80.00 21,600
120,000

XYZ focuses on contribution margin in its variance analysis. As you are working a Management
Accountant for this business house, the management asks you to furnish some key variances on
budgeted and actual sales for August 2011.

Required:

(i) Compute total sales –volume variance for August 2011.

(ii) Compute total sales-quantity variance for August 2011.
(iii)Compute total sales-mix variance for August 2011.
(iv) Comment on your results in requirements 1, 2 & 3.

-CMA, December-2011