Usage 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

MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate material variances and explain the significance of planning and operational variances.

Question

Emefa Ltd bakes cakes by mixing three ingredients, namely Flour, Sugar, and Butter, in the standard proportions of 5:3:2, respectively. However, the production process does not always mix the ingredients in these proportions, but the cake can be sold if the mixture is within certain limits.

The new production manager (a celebrity chef) has argued that the business should use only organic ingredients in its cake production. Organic ingredients are more expensive but should produce a product with an improved flavor and give health benefits for the customers. It was hoped that this would stimulate demand and enable an immediate price increase for the cakes.

The standard prices for the ingredients are:

Flour: GH¢ 2.50 per kilo
Sugar: GH¢ 3.00 per kilo
Butter: GH¢ 2.00 per kilo

There is a 5% normal loss in the production process.

The budget for production and sales in the period was 50,000 cakes. Actual production and sale of cake mixture was 228,000 kg. During the period, the inputs were as follows:

Ingredient	Kg	GH¢
Flour	96,000	249,600
Sugar	72,000	216,000
Butter	50,000	105,000

Required:
a) Calculate the following variances:
i) Material Mix Variance (3 marks)
ii) Material Yield Variance (3 marks)
iii) Material Usage Variance (3 marks)
b) Differentiate between planning variances and operational variances. (2 marks)
c) Explain why separating variances into their planning and operational components provides better information for planning and control purposes. (4 marks)

Answer

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Tags: Material variances, mix variance, Usage Variance, Variance Analysis, yield variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: MAY 2019

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

Question

a) BB Importers Ltd has been importing electrical gadgets through the port of Takoradi over the past ten years. Management is aware that the business has been facing seasonal fluctuations but there is no scientific basis for the determination of such variations that can be used to predict future revenue. As a newly recruited Cost Accountant, you have been provided with some past daily sales performance over a three-week period. Details of the sales performance are shown below:

Sales	Monday	Tuesday	Wednesday	Thursday	Friday
Week 1	780	830	890	850	850
Week 2	880	930	990	950	950
Week 3	980	1030	1090	1050	1050

Required:
Using daily moving averages, calculate the daily variation for the company. (15 marks)

b) The reasons for variances might be connected, and two or more variances may arise from the same cause. For example, a favorable variance and an adverse variance might have the same cause.

Required:
Explain the interrelationships between:
i) Material price and usage variances (2.5 marks)
ii) Labor rate and efficiency variances (2.5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Material Price Variance, Moving Averages, Sales Forecasting, Usage Variance
Level: Level 1

Topic: Forecasting, Standard Costing and Variance Analysis
Series: MAR 2024

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

MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate material variances and explain the significance of planning and operational variances.

Question

The standard prices for the ingredients are:

Flour: GH¢ 2.50 per kilo
Sugar: GH¢ 3.00 per kilo
Butter: GH¢ 2.00 per kilo

There is a 5% normal loss in the production process.

The budget for production and sales in the period was 50,000 cakes. Actual production and sale of cake mixture was 228,000 kg. During the period, the inputs were as follows:

Ingredient	Kg	GH¢
Flour	96,000	249,600
Sugar	72,000	216,000
Butter	50,000	105,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: Material variances, mix variance, Usage Variance, Variance Analysis, yield variance
Level: Level 2

Topic: Standard Costing and Variance Analysis
Series: MAY 2019

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

Question

Sales	Monday	Tuesday	Wednesday	Thursday	Friday
Week 1	780	830	890	850	850
Week 2	880	930	990	950	950
Week 3	980	1030	1090	1050	1050

Required:
Using daily moving averages, calculate the daily variation for the company. (15 marks)

b) The reasons for variances might be connected, and two or more variances may arise from the same cause. For example, a favorable variance and an adverse variance might have the same cause.

Required:
Explain the interrelationships between:
i) Material price and usage variances (2.5 marks)
ii) Labor rate and efficiency variances (2.5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Material Price Variance, Moving Averages, Sales Forecasting, Usage Variance
Level: Level 1

Topic: Forecasting, Standard Costing and Variance Analysis
Series: MAR 2024

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: Usage 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.

MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate material variances and explain the significance of planning and operational variances.

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

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.

MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate material variances and explain the significance of planning and operational variances.

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

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"

MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate material variances and explain the significance of planning and operational variances.

You're reporting an error for "MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis"

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q5 – Forecasting | 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"

MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate material variances and explain the significance of planning and operational variances.

You're reporting an error for "MA – May 2019 – L2 – Q5 – Standard Costing and Variance Analysis"

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q5 – Forecasting | 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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