- 20 Marks
IMAC – MAR 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis
Discuss tasks suitable for piece rate and hourly rate payment systems and compute labor variances and standard costing variances.
Question
a) Employees may be paid either using piece rate or hourly rate.
Required:
In reference to the statement above, state THREE (3) tasks/jobs that:
i) Piece rate may be used. (3 marks)
ii) Hourly rate may be used. (3 marks)
b) Krenkren enterprise uses the hourly rate to pay her employees. The current rate is GH¢6 per hour. However, employees are paid 1.5 times for each overtime hour worked. Each employee is to work a minimum of 40 hours a week without a guaranteed payment. Any extra hour will attract overtime rate.
Extract from the time sheet for a week has been provided below:
| Name | Staff Number | Hours worked |
|---|---|---|
| Kwame Sarfo | H 1356 | 56 |
| John Addae | H 3456 | 38 |
| Thomas Appia | F 2254 | 48 |
| Rose Danso | F 8645 | 50 |
Required:
Calculate the basic pay for each of the staff. (9 marks)
c) The following standard costs apply to the manufacture of a product by Pontir Ltd:
- Standard weight to produce one unit: 12 kgs
- Standard price per kg: GH¢9
- Standard hours to produce one unit: 10
- Standard rate per hour: GH¢4
Actual production and costs for one accounting period were:
| Cost Element | Actual Usage | Actual Cost (GH¢) |
|---|---|---|
| Material | 3,770 kgs | 35,815 |
| Labour | 2,755 hours | 11,571 |
The actual output was 290 units.
Required:
Calculate relevant material and labor cost variances and present these in a format suitable for presentation to the management of Pontir Ltd. (5 marks)
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