Standard Costing

Wrap-up Exercises (Adapted from RESA Handouts)

Problem 1: Materials and Labor Variance Analysis

Kodak Company has established the following standards for a single unit of its main product, Selfie Camera Tripod
(Stainless Edition):

Inputs Standards
Direct materials 3 metal bars at P2 per bar
Direct labor ½ labor hour at P10 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 a cost of P2.10 per bar.

Required:

1. Based on the BUDGETED production of 100 units:

A. How many 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 the ACTUAL production of 120 units:

A. How many bars should have been used? (Standard Quantity)

B. How much materials cost should have been incurred? (Standard material 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 Variance
D. Materials Price Variance

5. In the following month, Kodak purchased 500 bars at a total cost of P850 while only 400 bars out of these were
used; the standard quantity allowed for the actual production was 380 bars. Determine the following:

A. Total material variance

B. Materials quantity variance
C. Materials price usage variance
D. Materials purchase price variance

6. During the month, a total payroll of P540 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
Problem 2: Factory Overhead Budget:

RAFA Company shows the following data regarding its factory overhead:

Flexible budget formula: FOH = 20,000 + 1X

Where: X = number of labor hours.

 Standard: 1 unit of product requires 4 labor hours.

 Normal Capacity: 2,500 units.
 Budgeted Hours: A)______ hours.

Fixed Overhead (FFOH) B)_________ Fixed Overhead Rate (FR) E)________

Variable Overhead (VFOH) C)_________ Variable Overhead Rate (VR) F)________
Total Budgeted Overhead D)_________ Standard Overhead Rate (SR) G)________

Required:

1. Compute for the missing amounts.

2. What is the budgeted FOH if adjusted based on 7,500 actual hours?
3. What is the budgeted FOH if adjusted based on 8,000 standard hours?

Problem 3: (Factory Overhead Variance Analysis – Two Variance Method)

The normal capacity of Nadal Company is 12,000 labor hours per month. At normal capacity, the standard factory
overhead rate is P13 per labor hour based on P96,000 of budgeted fixed cost per month and a variable cost rate of
P5 per labor hour. During January, the Company operated at 12,500 labor hours, with actual factory overhead cost
of P165,000. The number of standard labor hours allowed for the production actually attained is 11,000.

Required: 1. Overhead FOH Variance 2. FOH Controllable Variance 3. FOH Volume Variance

Problem 4: (Factory Overhead Variance Analysis – Two, Three, and Four Way Variance Method)

Spain Company provides the following production data:

Standard factory overhead cost per unit of product: 4 hours at P3.00 per hour

A) Budgeted fixed factory overhead P20,000

B) Normal Production 2,500 units
C) Actual Production 2,000 units
D) Actual Hours 7,500 hours
E) Actual/ Factory overhead incurred (75% fixed) P26,000
Required:

1. Budgeted factory overhead 6. Volume Variance

2. Standard factory overhead 7. Spending Variance
3. Budgeted FOH based on actual hours 8. Efficiency Variance
4. Budgeted FOH based on standard hours 9. Variable spending variance
5. Controllable variance 10. Fixed spending variance