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Standard Costing: Problems

1. Standard costing can be applied to both manufacturing and non-manufacturing costs. It is compatible with job order costing but not process costing, and is applicable to repetitive process costing. Standards are often revised due to changes in costs and methods. 2. Variances with debit balances indicate unfavorable performance. Both favorable and unfavorable variances should be reviewed. Significant variances should be closed to cost of goods sold and inventory, while immaterial variances are closed to cost of goods sold. 3. Standards can help motivate employees by pinpointing responsibility. The material usage variance plus material price variance equals the total material cost variance. The sum of the spending variance and variable

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467 views2 pages

Standard Costing: Problems

1. Standard costing can be applied to both manufacturing and non-manufacturing costs. It is compatible with job order costing but not process costing, and is applicable to repetitive process costing. Standards are often revised due to changes in costs and methods. 2. Variances with debit balances indicate unfavorable performance. Both favorable and unfavorable variances should be reviewed. Significant variances should be closed to cost of goods sold and inventory, while immaterial variances are closed to cost of goods sold. 3. Standards can help motivate employees by pinpointing responsibility. The material usage variance plus material price variance equals the total material cost variance. The sum of the spending variance and variable

Uploaded by

Claire Barba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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STANDARD COSTING

TRUE OR FALSE
1. Standard costing applies to both manufacturing and non-manufacturing costs.
2. A standard cost system is compatible with job order costing, but not with process costing.
3. A standard cost system is applicable only to process costing where operation is repetitive.
4. Standard costing are not fixed standards, but most often revised because of changes in wages rates,
material prices, and production methods.
5. A variance with a debit balance indicates unfavorable performance.
6. Unfavorable variances should be reviewed, but significant favorable variances need not be reviewed.
7. Significant variances should be closed to cost of goods sold and inventory units while immaterial variances
should be closed to cost of goods sold.
8. Standards can pinpoint responsibility and, if properly used, can help motivate employees.
9. Materials usage variance + Materials price usage variance = Total materials cost variance
10. FOH analysis: Volume variance = Fixed volume variance
11. There is no capacity or volume variance under a standard variable costing system.
12. Material usage variance is a quantity variance; Material price usage variance is a price variance.
13. When overhead is applied on the basis of direct labor hours, if the labor efficiency variance is unfavorable,
the variable overhead efficiency variance is also unfavorable.
14. The material price variance is composed as the difference between actual price and standard price per unit
of raw material times the standard quantity of materials used.
15. The sum of spending variance and variable efficiency variance is equal to controllable variance.
16. When computing variances from standard costs, the difference between actual and standard price
multiplied by actual quantity yields a price variance
17. DM Variance + DL Variance + FOH Variance = Production Variance

PROBLEMS
MATERIALS AND LABOR VARIANCE ANALYSIS

FOTO Company uses a standard cost system to help control costs and has established the following standards for one
unit of its main product, The Wonder Camera Tripod:
Inputs Standards
Direct materials 3 metal bars per tripod at P 2.00 per bar
Direct labor ½ labor hour per tripod at P 10 per hour

At the start of the month, the budget includes a planned production of 100 units of tripod based on normal capacity; at
the end of the month, actual production was 120 units of tripod, which resulted to using 400 bars of metal, purchased at
cost of P 2.10 per bar.

REQUIRED;
1. Based on the BUDGETED production of 100 units:
A. How many metal bars must the company plan to use? (Budgeted quantity)
B. How much materials cost is included in the budget? (Budgeted cost)
2. Determine the actual cost of materials used. (Actual cost)
3. Based on ACTUAL production of 120 units:
A. How many metal bars should have been used? (Standard quantity)
B. How much materials cost should have been incurred? (Standard materials cost)
C. How many labor hours should have been spent? (Standard hours)
D. How much labor cost should have been incurred? (Standard labor cost)
4. Determine the following :
A. Materials budget variance
B. Materials standard cost variance
C. Materials quantity and price variance
5. During the month, a total payroll of P 540 was paid to laborers, working 45 labor hours, to produce the 120 units
of tripod. Determine the following:
A. Total labor variance
B. Labor efficiency variance
C. Labor rate variance
FACTORY OVERHEAD VARIANCE ANALYSIS

Fallen Company provides the following production data:

Total standard overhead cost per unit of product: 4 hours at P 3.00 per hour = P 12.00 unit
Budgeted fixed factory overhead P 20,000
Normal production 2,500 units
Actual production 2,000 units
Actual hours 7,500 hours
Actual factory overhead incurred (75% fixed) P 26,000

REQUIRED: Determine the following: (Indicate the type of variance: U= Unfavorable; F = Favorable)
1. Budgeted factory overhead
2. Standard factory overhead
3. Budgeted FOH based on actual hours
4. Budgeted FOH based on standard hours
5. Controllable variance
6. Volume variance
7. Spending variance
8. Variable efficiency variance
9. Variable spending variance
10. Fixed spending variance

God works in ways that are higher than ours.


We may imagine how God would answer our prayer.
But in the end, He will surprise us with something far greater than we asked for.

NAME:

TRUE OR FALSE MATERIALS AND LABOR VARIANCE FOH VARIANCE


1. 11. 1. A) 5.A) 1.
2. 12. 1. B) 5.B) 2.
3. 13. 2. 5.C) 3.
4. 14. 3.A) 4.
5. 15. 3.B) 5.
6. 16. 3.C) 6.
7. 17. 3.D) 7.
8. 4.A) 8.
9. 4.B) 9.
10. 4.C) 10.

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