Question Tag: Standard Costing

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  • 15 Marks

PM – Nov 2014 – L2 – Q6 – Standard Costing and Variance Analysis

Reconcile budgeted and actual gross profits for GOODLAND Limited, including variance calculations.

GOODLAND Limited produces and sells a single product. The company adopts a standard absorption costing system and absorbs overheads on the basis of direct labour hours. Presented below are the standard cost details and selling price for a single unit of the product:

It has been estimated that the production and sales for the month would be 2,000 units. However, the estimated production for the month has been used as a basis for determining the fixed overhead absorption rate.

The actual results for the month are as follows:

Required:

Prepare a statement that reconciles the budgeted gross profit with the actual gross profit for the month with a detailed computation of all the variances involved. (15 Marks)

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  • 20 Marks

PM – Nov 2014 – L2 – Q2 – Standard Costing and Variance Analysis

Calculate various cost and sales variances, including an operating statement for Ibek Limited.

Ibek Limited manufactures a standard product and operates a system of variance accounting using a fixed budget.

As a newly appointed Management Accountant, you are responsible for preparing the monthly operating statements.

Extracts from the budget for the standard product cost and actual data for the month ended 31 December 2013 are given below:

Budgeted and Standard Cost Data:

  • Budgeted sales and production for the month: 20,000 units
  • Standard cost for each unit of product:
Item Details
Direct materials: A: 10 kg at N2 per kg
B: 5 kg at N10 per kg
Direct wages 5 hours at N6 per hour
Fixed overhead Absorbed at 200% of direct wages
  • Budgeted sales price has been calculated to give a margin of 20% of sales price.

Actual Data for the Month Ended 31 December 2013:

  • Production: 19,000 units sold at a price of 15% higher than that budgeted
  • Direct materials consumed:
Item Quantity Cost per kg
Material A 192,000 kg N2.40
Material B 96,000 kg N9.40
  • Direct wages incurred: 92,000 hours at N6.40 per hour
  • Fixed production overhead incurred: N580,000

Required:

(a) Prepare the operating statement for the month ended 31 December 2013. (3 Marks)

(b) Calculate the following variances: i. Direct material cost variance (5 Marks)
ii. Direct labour variances (5 Marks)
iii. Overhead variances (3 Marks)
iv. Sales variances (4 Marks)

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  • 20 Marks

PM – May 2017 – L2 – SA – Q4 – Standard Costing and Variance Analysis

Calculate budgeted profit and perform variance analysis for Dabens Nigeria's job costing system.

  1. Dabens Nigeria Limited’s job costing system includes two direct cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products based on standard direct manufacturing labor hours (SDMLH). At the beginning of 2016, Dabens adopted the following standards for manufacturing costs and sales:
    S/N Cost Details Input Cost per Output Unit (N)
    1 Direct Materials 3 kg at N500 1,500
    2 Direct Manufacturing Labor 5 hours at N200 1,000
    3 Manufacturing Overhead: Variable N120 per SDMLH 600
    Manufacturing Overhead: Fixed N160 per SDMLH 800
    4 Unit Manufacturing Cost 3,900
    5 Standard Profit Margin 1,300
    6 Standard Selling Price 5,200

    The denominator level for total manufacturing overhead per month in 2016 is 40,000 direct manufacturing labor hours. Dabens’ flexible budget for January 2016 was based on this denominator level. January records show the following data:

    • Direct materials purchased: 25,000 kg at N520 per kg
    • Direct materials used: 23,100 kg
    • Direct manufacturing labor: 40,100 hours at N190 per hour
    • Total actual manufacturing overhead (fixed and variable): N12,000,000
    • Actual production/sales: 7,800 output units
    • Actual selling price: N5,350

    The proportion of actual variable and fixed overhead costs is consistent with the standard.

    Required:

    a. Calculate the budgeted profit of the company for January 2016.
    (2 Marks)

    b. Calculate the following variances for January 2016:

    • i. Direct material variances
    • ii. Direct manufacturing labor variances
    • iii. Variable manufacturing overhead variances
    • iv. Fixed manufacturing overhead variances
    • v. Sales variances
      (10 Marks)

    c. Prepare a statement reconciling the actual profit with the budgeted profit.
    (8 Marks)

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  • 15 Marks

PM – Nov 2015 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate material, labour, and variable overhead variances, and discuss causes for variances in KOMERE Limited’s cost system.

KOMERE Limited operates a Standard Costing System. Below are the standard and actual costs for October 2015:

Standard Cost Information:

Direct Material:

  • A: 20 kg at N100 per kg = N2,000
  • B: 30 kg at N80 per kg = N2,400

Direct Labour:

  • Skilled: 10 hours at N40 per hour = N400
  • Unskilled: 10 hours at N25 per hour = N400

Variable Overhead Cost:

  • 10 hours at N20 per hour = N200

Total Standard Cost per unit = N5,250

Actual Results:

  • Direct Material:
    • Material A: 105,000 kg purchased at N10,290,000; 99,000 kg consumed
    • Material B: 148,000 kg purchased at N11,988,000; 144,000 kg consumed
  • Direct Labour:
    • Skilled Labour: 56,000 hours at N2,352,000
    • Unskilled Labour: 56,000 hours at N1,344,000
  • Variable Overhead: N1,064,000
  • Actual Production: 4,800 units

Required:

(a) Calculate all the relevant variances. (8 Marks)

(b) What are possible causes of the variances computed? (7 Marks)

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  • 12 Marks

MI – Nov 2020 – L1 – SB – Q4b – Basic Variance Analysis

Calculate material and labour variances for product AB, and list possible causes of each variance.

b. ABC maintains the following standard cost card for product AB:

Item Standard Quantity Standard Price Total Cost (N)
Direct Material A 3kg @ N8 per kg N24
Direct Material B 5kg @ N6 per kg N30
Direct Labour 2hrs @ N24 per hr N48
Variable Overhead 2hrs @ N9 per hr N18
Total Standard Cost N120

Actual Results for the Period:

  • Actual production: 11,800 units
  • Direct material A: 35,800kg @ N7.5 per kg = N268,500
  • Direct material B: 62,000kg @ N7 per kg = N434,000
  • Direct labour: 24,500 hours @ N25 per hour = N612,500
  • Variable overhead: 24,500 hours @ N9 per hour = N220,500

Required:
i. Calculate the following variances:

  • Material price
  • Material usage
  • Total material
  • Labour rate
    (9 Marks)

ii. List TWO possible causes of each of the variances in (i) above. (3 Marks)

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  • 8 Marks

MI – Nov 2020 – L1 – SB – Q4a – Costing Techniques

Identify the purposes of standard costing systems and the types of standards used in management information.

a. Standard costing systems are widely used because they provide cost information for many different purposes.

Required:
i. Identify FIVE of such purposes. (5 Marks)
ii. State THREE types of standards. (3 Marks)

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  • 1 Marks

MI – May 2018 – L1 – SA – Q7 – Costing Techniques

Features of standard cost.

Which of the following is NOT a feature of standard cost?
A. Estimated
B. Predetermined
C. Actual
D. Basis for later comparison
E. Developed from historical data

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  • 1 Marks

MI – Nov 2021 – L1 – SA – Q9 – Basic Variance Analysis

Calculate the total material variance for product TU.

STUV is into production of a single product TU. Standard material cost per unit is 2kg @₦500 per kg. Actual production during the period is 5,000 units. Using 1.95kg purchased at the rate of ₦510 per kg. What is the total material variance?

A. ₦125,000 (F)
B. ₦97,500 (A)
C. ₦97,500 (F)
D. ₦27,500 (F)
E. ₦27,500 (A)

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  • 20 Marks

MI – Nov 2022 – L1 – SB – Q3 – Costing Methods

Preparation of a standard cost card for Beta's product based on given rates

The details below relate to a product (BETA) and are to be used in the revision of its standard cost:

Item Standard Price/Rate
Material
30kg of B35 ₦200/kg
50 units of K010 ₦50/unit
20 units of K035 ₦100/unit
Direct Labour
Machine Operations: 50 hours ₦120/hour
30 hours ₦105/hour
27 hours ₦80/hour
Packaging: 12 hours ₦96/hour

Production Overhead:

  • Labour hour rate: ₦9/hour
  • Machine hour rate: ₦7/hour

Departments X, Y, and Z are for operations while department P is for packaging. The batch quantity is 200, and the revision date is April 30, 2020.

Required:
Prepare a STANDARD COST CARD for the product (Beta).

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  • 1 Marks

MI – Nov 2019 – L1 – SA – Q3 – Costing Techniques

This question asks to identify the standard that assumes no wastage or machine breakdown in perfect operating conditions.

A standard that can be attained under the perfect operating conditions with no allowance for wastages, idle time and machine breakdown is known as:
A. Current Standard
B. Regular Standard
C. Ideal Standard
D. Attainable Standard
E. Basic Standard

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  • 1 Marks

MI – Mar-Jul 2020 – L1 – SA – Q12 – Costing Techniques

Identify the type of standard that assumes imperfect conditions.

The standard set on the assumption of conditions that recognise an element of imperfection is known as:

A. Ideal standard
B. Basic standard
C. Current standard
D. Attainable standard
E. Favourable standard

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  • 10 Marks

MA – Mar 2023 – L2 – Q3a – Standard costing and variance analysis

Prepare a standard cost card for one door using the provided variances and actual costs.

Tsekpo produces strong and affordable doors for the Ghanaian market. The company has been operating for the past five years from its manufacturing base at Tafo.

During the year under consideration, Tsekpo invested in a new information technology system in order to improve its management accounting information. Unfortunately, there have been problems with the software since its acquisition. The standard cost card, which provides details of the standard production cost to make one door, has been lost and the company is unable to prepare its budget for the year ahead.

The Management Accountant has retrieved some information relating to actual costs and variances for the year. The budgeted production for the year was 21,000 doors. Other relevant information is shown below:

Actual Costs:

Cost Element Actual Quantity Amount (GH¢)
Direct material costs (16,200 sq. m) 16,200 sq. m 81,000
Direct labour costs (8,640 hours) 8,640 hours 108,864
Variable production overhead costs N/A 54,000
Fixed production overhead costs N/A 85,200
Variances:

Direct material price variance: GH¢4,050 (Favorable)
Direct material usage variance: GH¢5,670 (Favorable)
Direct labour rate variance: GH¢864 (Favorable)
Direct labour efficiency variance: GH¢27,432 (Favorable)
Variable production overhead expenditure variance: GH¢432 (Adverse)
Variable production overhead efficiency variance: GH¢13,392 (Favorable)
Fixed production overhead expenditure variance: GH¢3,775 (Adverse)
Additional Information:

Actual production was 600 doors above the budgeted level.
Tsekpo operates a standard variable costing system.
Required:
Using the information provided, prepare the standard cost card for the production of one door.

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  • 5 Marks

MA – Aug 2022 – L2 – Q2b – Budgetary control

This question asks for the similarities and differences between a budget and a standard in financial control.

Budgets and standards are very similar and interrelated, but there are notable differences between them.

Required:
Explain TWO (2) similarities and TWO (2) differences between a budget and a standard.

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  • 5 Marks

MA – Dec 2023 – L2 – Q2c – Decision making techniques

This question explains why standard costing may not be appropriate in a Just-In-Time (JIT) and Total Quality Management (TQM) environment.

Explain why a standard costing system may not be considered appropriate for the following modern manufacturing environments listed below:
i) Just-In-Time (JIT).
ii) Total Quality Management (TQM).

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  • 3 Marks

MA – May 2018 – L2 – Q5b – Standard costing and variance analysis

Prepare the standard cost card per unit of product Jupiter.

Prepare the standard cost card per unit of product Jupiter.

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  • 12 Marks

MA – May 2018 – L2 – Q5a – Standard Cost Variances Analysis

Calculate standard cost variances including sales price, material price, and labour efficiency.

The following information relates to product Jupiter, produced by Bfield Ltd during January. This represents the information that remains after a fire in the premises destroyed most of the accounting records.

Variances GH¢
Selling price 50,000 A
Materials price 28,500 F
Materials usage 7,500 A
Labour rate 18,700 F
Labour efficiency 20,400 A

Actual data

  • Sales (25,000 units at GH¢10) = GH¢250,000
  • Materials costs (112,500 kg at GH¢1.20) = GH¢135,000
  • Labour costs (75,000 hrs. at GH¢1.9) = GH¢142,500

There was no opening or closing inventories.

Required:
Calculate the following:
i) Standard selling price per unit; (3 marks)
ii) Standard cost of material per kilogram; (3 marks)
iii) Standard kilograms of materials required per unit; (2 marks)
iv) Standard labour rate per hour; (2 marks)
v) Standard hours of labour required per unit. (2 marks)

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  • 12 Marks

MA – May 2018 – L2 – Q3a – Standard Costing and Variance Analysis

Prepare profit statements for April and May using standard costing and absorption costing methods.

a) Resol Ltd commenced trading on 1 April 2011 making the product Resol. The standard cost sheet for Resol is as follows:

The fixed production overhead figure has been calculated on the basis of a budgeted normal output of 24,000 units per annum. Fixed Sales and Administration costs are estimated at GH¢24,000 per annum. You may assume that all budgeted fixed expenses are incurred evenly over the year.

The sales price is GH¢35.00 and the actual number of units produced and sold was as follows:

April May
Production – units 2,000 2,500
Sales – units 1,500 3,000

Required:
Prepare a profit statement for each of the months April and May using:

  • Standard costing
  • Absorption costing

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  • 5 Marks

MA – Nov 2020 – L2 – Q4b – Standard Costing and Variance Analysis

Discuss the advantages and disadvantages of using standard costing in cost management.

b) Explain THREE (3) advantages and TWO (2) disadvantages of standard costing.

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  • 10 Marks

MA – Nov 2020 – L2 – Q3b – Standard Costing and Variance Analysis

Calculate various variances including sales volume contribution, price, mix, yield, labour rate, labour efficiency, and idle time variances for Zip Ltd.

b) Zip Ltd, a premium food manufacturer, is reviewing its operations for a three-month period for 2019. The company operates a standard marginal costing system and manufactures one product, ZP, for which the following standard revenue and cost data per unit of product is available:

  • Selling price: GH¢12.00
  • Direct material A: 2.5 kg at GH¢1.70 per kg
  • Direct material B: 1.5 kg at GH¢1.20 per kg
  • Direct labour: 0.45 hours at GH¢6.00 per hour
  • Fixed production overheads for the three-month period were expected to be GH¢62,500.

Actual data for the three-month period was as follows:

  • Sales and production: 48,000 units of ZP were produced and sold for GH¢580,800
  • Direct material A: 121,951 kg were used at a cost of GH¢200,000
  • Direct material B: 67,200 kg were used at a cost of GH¢84,000
  • Direct labour: Employees worked for 18,900 hours, but 19,200 hours were paid at a cost of GH¢117,120
  • Fixed production overheads: GH¢64,000

Required: Calculate the following variances:

i) Sales volume contribution and sales price variances
ii) Price, mix, and yield variances for each material
iii) Labour rate, labour efficiency, and idle time variances

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  • 5 Marks

MA – May 2021 – L2 – Q4c – Standard costing and variance analysis Series

Explain two approaches used in establishing standard costs within an organization.

c) State and explain TWO (2) approaches that can be used in setting a standard within an organisation.

(5 marks)

 

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