Price Variance – NBC Institute

PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis

Question tests calculation and interpretation of material price, usage, mix and yield variances for a petroleum additive manufacturer.

Question

Okeke and Sons produces a new petroleum additive called ‘EPBC’ used in increasing petrol engine efficiency, while at the same time reducing its fuel consumption. The actual and budgeted quantities in litres of materials required to produce ‘EPBC’ and the budgeted prices of materials in October 2016 are as follows:

You are required to:

a. Calculate the individual chemical and total direct materials price and usage variances for October 2016. (4 Marks)

b. Calculate the individual chemical and total direct materials yield and mix variances for October 2016. (4 Marks)

c. What conclusions would you draw from the various variances calculated in (a) and (b) above? (4 Marks)

d. State ONE possible cause of each of the variances computed in (a) and (b) above. (3 Marks)

Answer

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Tags: Cost Variances, Material variances, mix variance, Price Variance, Usage Variance, yield variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: NOV 2016

PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis

Analyze variances, reconcile budgeted and actual profit, and evaluate pricing strategy success for KK Plc.

Question

KK Plc. buys small tablet computers which it customizes for the Nigerian market and then resells to electronics retailers. Although a detailed variance analysis is carried out each month, the CEO John, T, has become concerned that no one has a clear responsibility for taking action in response to this analysis or for using it to carry out an ex-post analysis of the outcome of important decisions.

The following is an extract from last month’s budget:

Model	A	B	C
Selling price/unit (N)	1,000	1,250	1,500
Variable cost/unit (N)	400	500	600
Sales (units)	25,000	40,000	15,000

The budgeted fixed costs were N12,500,000 for the month, which were not dependent on the mix or quantities of products sold. When the budget was being prepared, it was estimated that the total size of the market (including sales by the company and the competitors) would be 400,000 units.

Shortly after the beginning of the month, the marketing director, Okon Nelson, decided that a change of pricing strategy was necessary in response to the recessionary economic conditions. The price of Model A was reduced by 10%, and the prices of Models B and C were each reduced by 20%. The company was partly successful in passing on the impact of these price reductions to its suppliers, and as a consequence, the variable cost per unit for all three models was reduced by 5%. Actual fixed costs were 5% higher than budgeted because of the marketing costs associated with publishing the price reductions.

As a result of the recessionary conditions, the actual total market size was just 200,000 units. The actual quantities sold by the company were as follows:

Actual quantities sold by the company were as follows:

Model	Sales (units)
A	14,800
B	29,500
C	11,700

Required:
a. Present a comprehensive analysis of variances, reconciling the budgeted and actual profit for last month in as much detail as possible from the information provided. (25 Marks)
b. Evaluate the financial success (or otherwise) of the decision to change the pricing strategy and assess whether the difference between the budgeted and actual performance was attributable mainly to luck or to factors within the company’s control. (5 Marks)

Answer

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Tags: Budget profit, Cost Analysis, Fixed Overhead, Market Share, Price Variance, Pricing Strategy, Profit reconciliation, Sales quantity, Variance Analysis
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: MAY 2019

MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis

This question calculates the sales price, volume, quantity, and mix variances for three products sold by Manjo Plc for the month of January.

Question

The following information relates to the estimate and actual results of Manjo Plc for the month of January:

Particulars	KO	TO	KA
Budgeted sales (units)	36,000	27,000	18,000
Standard selling price (GH¢)	15	10	12.5
Standard variable cost (GH¢)	8	4	7.5
Actual sales (units)	30,000	35,000	25,000
Actual sales (GH¢)	420,000	367,500	325,000

Required:
i) Calculate the sales price variance. (3 marks)
ii) Calculate the sales volume variance. (3 marks)
iii) Analyse the sales volume variance into:

Sales quantity variance. (5 marks)
Sales mix variance. (4 marks)

Answer

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Tags: mix variance, Price Variance, Quantity Variance, Sales Variance, Volume Variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: MAR 2024

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

Question

You have been asked as a cost accountant to reconcile the Budgeted profit to the actual profit using the variance report generated by the management accountant.

i. Calculate the sales variances (2 marks)
ii. The total material variance (1 mark)
iii. The total wage variances (1 mark)
iv. Total manufacturing overhead variances (1 mark)
v. Reconciliation of Budget profit to the actual profit (4 marks)

(Total = 9 marks)

Answer

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Tags: Material Variance, Overhead Variance, Price Variance, Profit reconciliation, Sales Variance, Wage variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: NOV 2015

IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour

Calculate material variances, explain time and piece rate, and compute direct and indirect labour costs

Question

Walata Ltd manufactures and sells a unique anti-cold formula called the Magic Ball. The product is produced from a combination of two ingredients; R and Q with the following details:

Standard quantity per unit:

Q: 3kg
R: 2kg

Standard prices:

Q: GH¢2.50
R: GH¢4.00

For the quarter just ended, the following results were recorded:

Actual production: 2,000 units

Material	Quantity purchased and used	Price per Kilogramme
Q	4,800 kg	GH¢4.25
R	5,400 kg	GH¢2.20

Required:
i) Calculate the price variance for each material. (3 marks)
ii) Calculate the usage variance for each material. (3 marks)

b) Apagya Ltd has two product lines AB and CD. Time rate and piece rate labour rewarding systems are used for AB and CD products respectively.
Required:
Explain the terms time rate and piece rate, clearly outlining their differences and giving examples of business settings where each could be applied. (4 marks)

c) AB Ltd operates a 40-hour weekly work regime and rewards labour for all overtime worked at time and one-half.
The wage rate is GH¢80 per hour.
The following details are recorded for the month of October 2019 for an employee (Adamu):

Week	Hours Worked
1	36
2	48
3	45
4	46

Required:
i) Compute the total direct labour costs for Adamu for the month of October 2019. (4 marks)
ii) Calculate the total indirect labour costs for Adamu for the month of October 2019. (4 marks)

d) Explain the treatment of overtime premium in accounting for labour costs. (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Overtime Premium, Piece Rate, Price Variance, Time Rate, Usage Variance
Level: Level 1

Topic: Accounting for Inventory and Labour

PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis

Question tests calculation and interpretation of material price, usage, mix and yield variances for a petroleum additive manufacturer.

Question

You are required to:

a. Calculate the individual chemical and total direct materials price and usage variances for October 2016. (4 Marks)

b. Calculate the individual chemical and total direct materials yield and mix variances for October 2016. (4 Marks)

c. What conclusions would you draw from the various variances calculated in (a) and (b) above? (4 Marks)

d. State ONE possible cause of each of the variances computed in (a) and (b) above. (3 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Variances, Material variances, mix variance, Price Variance, Usage Variance, yield variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: NOV 2016

PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis

Analyze variances, reconcile budgeted and actual profit, and evaluate pricing strategy success for KK Plc.

Question

The following is an extract from last month’s budget:

Model	A	B	C
Selling price/unit (N)	1,000	1,250	1,500
Variable cost/unit (N)	400	500	600
Sales (units)	25,000	40,000	15,000

As a result of the recessionary conditions, the actual total market size was just 200,000 units. The actual quantities sold by the company were as follows:

Actual quantities sold by the company were as follows:

Model	Sales (units)
A	14,800
B	29,500
C	11,700

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget profit, Cost Analysis, Fixed Overhead, Market Share, Price Variance, Pricing Strategy, Profit reconciliation, Sales quantity, Variance Analysis
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: MAY 2019

MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis

This question calculates the sales price, volume, quantity, and mix variances for three products sold by Manjo Plc for the month of January.

Question

The following information relates to the estimate and actual results of Manjo Plc for the month of January:

Particulars	KO	TO	KA
Budgeted sales (units)	36,000	27,000	18,000
Standard selling price (GH¢)	15	10	12.5
Standard variable cost (GH¢)	8	4	7.5
Actual sales (units)	30,000	35,000	25,000
Actual sales (GH¢)	420,000	367,500	325,000

Required:
i) Calculate the sales price variance. (3 marks)
ii) Calculate the sales volume variance. (3 marks)
iii) Analyse the sales volume variance into:

Sales quantity variance. (5 marks)
Sales mix variance. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: mix variance, Price Variance, Quantity Variance, Sales Variance, Volume Variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: MAR 2024

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

Question

You have been asked as a cost accountant to reconcile the Budgeted profit to the actual profit using the variance report generated by the management accountant.

(Total = 9 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Material Variance, Overhead Variance, Price Variance, Profit reconciliation, Sales Variance, Wage variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: NOV 2015

IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour

Calculate material variances, explain time and piece rate, and compute direct and indirect labour costs

Question

Walata Ltd manufactures and sells a unique anti-cold formula called the Magic Ball. The product is produced from a combination of two ingredients; R and Q with the following details:

Standard quantity per unit:

Q: 3kg
R: 2kg

Standard prices:

Q: GH¢2.50
R: GH¢4.00

For the quarter just ended, the following results were recorded:

Actual production: 2,000 units

Material	Quantity purchased and used	Price per Kilogramme
Q	4,800 kg	GH¢4.25
R	5,400 kg	GH¢2.20

Required:
i) Calculate the price variance for each material. (3 marks)
ii) Calculate the usage variance for each material. (3 marks)

Week	Hours Worked
1	36
2	48
3	45
4	46

d) Explain the treatment of overtime premium in accounting for labour costs. (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Overtime Premium, Piece Rate, Price Variance, Time Rate, Usage Variance
Level: Level 1

Topic: Accounting for Inventory and Labour

Question Tag: Price Variance

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PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis

Question tests calculation and interpretation of material price, usage, mix and yield variances for a petroleum additive manufacturer.

PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis

Analyze variances, reconcile budgeted and actual profit, and evaluate pricing strategy success for KK Plc.

MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis

This question calculates the sales price, volume, quantity, and mix variances for three products sold by Manjo Plc for the month of January.

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour

Calculate material variances, explain time and piece rate, and compute direct and indirect labour costs

PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis

Question tests calculation and interpretation of material price, usage, mix and yield variances for a petroleum additive manufacturer.

PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis

Analyze variances, reconcile budgeted and actual profit, and evaluate pricing strategy success for KK Plc.

MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis

This question calculates the sales price, volume, quantity, and mix variances for three products sold by Manjo Plc for the month of January.

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour

Calculate material variances, explain time and piece rate, and compute direct and indirect labour costs

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PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis

Question tests calculation and interpretation of material price, usage, mix and yield variances for a petroleum additive manufacturer.

You're reporting an error for "PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis"

PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis

Analyze variances, reconcile budgeted and actual profit, and evaluate pricing strategy success for KK Plc.

You're reporting an error for "PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis"

MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis

This question calculates the sales price, volume, quantity, and mix variances for three products sold by Manjo Plc for the month of January.

You're reporting an error for "MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis"

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

You're reporting an error for "MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis"

IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour

Calculate material variances, explain time and piece rate, and compute direct and indirect labour costs

You're reporting an error for "IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour"

PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis

Question tests calculation and interpretation of material price, usage, mix and yield variances for a petroleum additive manufacturer.

You're reporting an error for "PM – NOV 2016 – L2 – Q5 – Standard Costing and Variance Analysis"

PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis

Analyze variances, reconcile budgeted and actual profit, and evaluate pricing strategy success for KK Plc.

You're reporting an error for "PM – May 2019 – L2 – Q1 – Standard Costing and Variance Analysis"

MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis

This question calculates the sales price, volume, quantity, and mix variances for three products sold by Manjo Plc for the month of January.

You're reporting an error for "MA – Mar 2024 – L2 – Q3a – Standard costing and variance analysis"

MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis

Calculate sales, material, wage, overhead variances, and reconcile budgeted profit to actual profit.

You're reporting an error for "MA – Nov 2015 – L2 – Q1d – Standard costing and variance analysis"

IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour

Calculate material variances, explain time and piece rate, and compute direct and indirect labour costs

You're reporting an error for "IMAC – NOV 2019 – L1 – Q4 – Accounting for Inventory and Labour"

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