STANDARD COSTING SAMPLE PROBLEMS

Problem 1: Nicholas Company manufacturers TVs. Some of the company's data was misplaced. Use
the following information to replace the lost data:

Analysis Actual Flexible Flexible Sales-Volume Static

Results Variances Budget Variances Budget

Units Sold 112,500 112,500 103,125

Revenues P42,080 P1,000 F (A) P1,400 U (B)

Variable Costs (C) P200 U P15,860 P2,340 F P18,200

Fixed Costs P8,280 P860 F P9,140 P9,140

Operating Income P17,740 (D) P16,080 (E) P15,140

Required:
a. What are the respective flexible-budget revenues (A)?
b. What are the static-budget revenues (B)?
c. What are the actual variable costs (C)?
d. What is the total flexible-budget variance (D)?
e. What is the total sales-volume variance (E)?
f. What is the total static-budget variance?

Answer:

a. P42,080 – P1,000 = P41,080

b. P41,080 + P1,400 = P42,480

c. P15,860 + P200 = P16,060

d. P17,740 – P16,080 = P1,660 favorable

e. P2,340 favorable + P1,400 unfavorable = P940 favorable

f. P17,740 – P15,140 = P2,600 favorable

Problem 2: Madzinga’s Draperies manufactures curtains. A certain window requires the following:

Direct materials standard 10 square yards at P5 per yard

Direct manufacturing labor standard 5 hours at P10

During the second quarter, the company made 1,500 curtains and used 14,000 square yards of
fabric costing P68,600. Direct labor totaled 7,600 hours for P79,800.

Required:
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.

Answer:

a. Direct materials variances:

Actual unit cost = P68,600/14,000 square yards

= P4.90 per square yard

Price variance = 14,000 x (P5.00 – P4.90)

= P1,400 favorable

Efficiency variance = P5.00 x [14,000 – (1,500 x 10)]

= P5,000 favorable

b. Direct manufacturing labor variances:

Actual labor rate = P79,800/7,600

= P10.50 per hour

Price variance = 7,600 x (P10.50 – P10.00)

= P3,800 unfavorable

Efficiency variance = P10.00 x (7,600 – 7,500)

= P1,000 unfavorable
Problem 3:The following data for the Alma Company pertain to the production of 1,000 urns during
August.

Direct Materials (all materials purchased were used):

Standard cost: P6.00 per pound of urn.

Total actual cost: P5,600.
Standard cost allowed for units produced was P6,000.
Materials efficiency variance was P120 unfavorable.

Direct Manufacturing Labor:

Standard cost is 2 urns per hour at P24.00 per hour.

Actual cost per hour was P24.50.
Labor efficiency variance was P336 favorable.

Required:
a. What is standard direct material amount per urn?
b. What is the direct material price variance?
c. What is the total actual cost of direct manufacturing labor?
d. What is the labor price variance for direct manufacturing labor?

a. Standard cost per urn = P6,000/1,000

= P6.00 per urn

Standard number of pounds per urn= P6.00/P6.00

= 1.0 pound per urn

b. Materials price variance = Total variance – efficiency

variance
= (P5,600 – P6,000) – P120
unfavorable
= P520 favorable

c. Total standard labor cost of actual hours = ((1,000/2) x P24) – P336

favorable
= P11,664
Actual hours = P11,664/24 = 486 hours
Total actual costs = 486 x P24.50 = P11,907

d. Labor price variance = P11,907 – P11,664

= P243 unfavorable
Problem 4:Littrell Company produces chairs and has determined the following direct cost categories
and budgeted amounts:

Standard Inputs Standard Cost

Category for 1 output per input
Direct Materials 1.00 P7.50
Direct Labor 0.30 9.00
Direct Marketing 0.50 3.00

Actual performance for the company is shown below:

Actual output: (in units) 4,000

Direct Materials:
Materials costs P30,225
Input purchased and used 3,900
Actual price per input P7.75
Direct Manufacturing Labor:
Labor costs P11,470
Labor-hours of input 1,240
Actual price per hour P9.25
Direct Marketing Labor:
Labor costs P5,880
Labor-hours of input 2,100
Actual price per hour P2.80

Required:
a. What is the combined total of the flexible-budget variances?
b. What is the price variance of the direct materials?
c. What is the price variance of the direct manufacturing labor and the direct marketing
labor, respectively?
d. What is the efficiency variance for direct materials?
e. What are the efficiency variances for direct manufacturing labor and direct marketing
labor, respectively?
 Answer:
a. Actual Results Flexible Budget Variances
Direct materials P30,225 P30,000 P225 U
Direct manufacturing labor 11,470 10,800 670 U
Direct marketing labor 5,880 6,000 120 F
P47,575 P46,800 P775 U

b. (P7.75 – P7.50) x (3,900) = P975 unfavorable

c. Manufacturing Labor (P9.25 – P9.00) x 1,240 = P310 unfavorable

Marketing Labor (P2.80 – P3.00) x 2,100 = P420 favorable

d. [3,900 – (4,000 units x 1.00)] x P7.50 = P750 favorable

e. Manufacturing Labor = [1,240 hours – (4,000 x 0.30 hours)] x P9.00 = P360 unfavorable
Marketing Labor = [2,100 hours – (4,000 x 0.50 hours)] x P3.00 = P300.00
unfavorable

Problem 5: McKenna Company manufactured 1,000 units during April with a total overhead budget of
P12,400. However, while manufacturing the 1,000 units the microcomputer that contained the
month's cost information broke down. With the computer out of commission, the accountant has been
unable to complete the variance analysis report. The information missing from the report is lettered
in the following set of data:

Variable overhead:
Standard cost per unit: 0.4 labor hour at P4 per hour
Actual costs: P2,100 for 376 hours
Flexible budget: a
Total flexible-budget variance: b
Variable overhead spending variance: c
Variable overhead efficiency variance: d

Fixed overhead:
Budgeted costs: e
Actual costs: f
Flexible-budget variance: P500 favorable

Required:
Compute the missing elements in the report represented by the lettered items.
Answer:
a. 1,000 x 0.40 x P4 = P1,600

b. P2,100 – P1,600 = P500 unfavorable

c. P2,100 – (376 x P4) = P596 unfavorable

d. P1,504 – P1,600 = P96 favorable

e. P12,400 – P1,600 = P10,800

f. P10,800 – P500 favorable = P10,300

Problem 6: Everjoice Company makes clocks. The fixed overhead costs for 20X5 total P720,000.
The company uses direct labor-hours for fixed overhead allocation and anticipates 240,000 hours
during the year for 480,000 units. An equal number of units are budgeted for each month.

During June, 42,000 clocks were produced and P63,000 were spent on fixed overhead.

Required:
a. Determine the fixed overhead rate for 20X5 based on units of input.
b. Determine the fixed overhead static-budget variance for June.
c. Determine the production-volume overhead variance for June.

Answer:
a. Fixed overhead rate = P720,000/240,000 = P3.00 per hour

b. Fixed overhead static budget variance = P63,000 – (P720,000/12) = P3,000 unfavorable

c. Budgeted fixed overhead rate per output unit = P720,000/480,000 = P1.50

Denominator level in output units = (40,000 – 42,000) x P1.50 = P3,000 favorable

Problem 7: Lungren has budgeted construction overhead for August of P260,000 for variable costs
and P435,000 for fixed costs. Actual costs for the month totaled P275,000 for variable and
P445,000 for fixed. Allocated fixed overhead totaled P440,000. The company tracks each
item in an overhead control account before allocations are made to individual jobs. Spending
variances for August were P10,000 unfavorable for variable and P10,000 unfavorable for
fixed. The production-volume overhead variance was P5,000 favorable.

Required:
a. Make journal entries for the actual costs incurred.
b. Make journal entries to record the variances for August.

Answer:
a. Variable Overhead Control 275,000
Accounts Payable and other accounts 275,000
To record actual variable construction overhead

Fixed Overhead Control 445,000

Accumulated Depreciation, etc. 445,000
To record actual fixed construction overhead

b. Variable Overhead Allocated 260,000

Variable Overhead Spending Variance 10,000
Variable Overhead Efficiency Variance* 5,000
Variable Overhead Control 275,000
To record variances for the period

*Arrived at this number by P275,000 – P260,000 – P5,000

Fixed Overhead Allocated 440,000

Fixed Overhead Spending Variance 10,000
Fixed Overhead Production-Volume Variance 5,000
Fixed Overhead Control 445,000
To record variances for the period
Problem 8: Different management levels in Bates, Inc., require varying degrees of managerial
accounting information. Because of the need to comply with the managers' requests, four different
variances for manufacturing overhead are computed each month. The information for the September
overhead expenditures is as follows:

Budgeted output units 3,200 units

Budgeted fixed manufacturing overhead P20,000
Budgeted variable manufacturing overhead P5 per direct labor hour
Budgeted direct manufacturing labor hours 2 hours per unit
Fixed manufacturing costs incurred P26,000
Direct manufacturing labor hours used 7,200
Variable manufacturing costs incurred P35,600
Actual units manufactured 3,400
Required:
a. Compute a 4-variance analysis for the plant controller.
b. Compute a 3-variance analysis for the plant manager.
c. Compute a 2-variance analysis for the corporate controller.
d. Compute the flexible-budget variance for the manufacturing vice president.

Answer:
a. 4-variance analysis:
Variable overhead spending variance = P35,600 – (7,200 x P5) = P400 favorable
Variable overhead efficiency variance = P5 x (7,200 – 6,800*) = P2,000 unfavorable
*
3,400 units x 2 hours = 6,800 hours
Fixed overhead spending variance = P26,000 – P20,000 = P6,000 unfavorable
Fixed overhead production-volume variance = P20,000 – (3,400 x 2 x P3.125*) = P1,250
favorable
*
P20,000/(3,200 units x 2 hours) = P3.125
b. 3-variance analysis:
Spending variance = P400 favorable + P6,000 unfavorable = P5,600
unfavorable
Efficiency variance = P2,000 unfavorable
Production-volume variance = P1,250 favorable
c. 2-variance analysis:
Flexible-budget variance = P400 F + P2,000 U + P6,000 U = P7,600
unfavorable
Production-volume variance = P1,250 favorable
d. 1-variance analysis: Flexible
Actual Budget Variances
Fixed overhead P26,000 P21,250* P4,750 U
**
Variable overhead 35,600 34,000 1,600 U
Flexible-budget variance P6,350 U

*
P3.125 x 3,400 x 2 = P21,250
**
3,400 x 2 x P5 = P34,000