CCA School of Accountancy’s

Mock Exam
PAPER: Management Accounting (MA)

TUTOR: Diwas Silwal

Full Marks 20*10=200

Pass Marks 100

Time allowed: 4 Hours

STUDENTS NAME: … … … … … … … … … … … .
DATE: … … … … … … … … … … … … … … … … … … …

Marks obtained: … … … … … … … … … … … …
Teachers Remarks :
………………………………………………………………………………
………………………………………………………………………………

1.Company C operates a standard costing system and absorbs variable

production overhead in each production cost centre on the basis of direct labor
hours.

The budget for cost centre X for a period includes

Product A 1600 units at 1.2 direct labor
hours per unit
Product B 900 units at 0.9 direct labor
hours per unit
Variable $11,466
overheads

In the cost centre Y, for the same period, the standard variable produ
ction overhead absorption rate is $5.60 per direct labour hour.

Cost Cost
centre X centre Y
Variable production overhead expenditure $11,629 $17,090
Direct labor hour worked 2,775 3,020
Product A production 1,660 units
Product B production 830 units
Standard direct labor hours of actual output 3,230

Task 1: (4 marks)
1. What is the standard variable production overhead absorption rate for
the cost centre X for the period (rounded to two decimal)?
$...............
 2. What is the efficiency ratio achieved for cost centre X for the period
(rounded to one decimal)?
… … … … … .. %
Task 2: (2 marks )
What is the total variable production overhead variance for the cost centre Y
for the period?
1. $178 fav
2. $178 adv
3. $998 fav
4. $998 adv

Task 3: (4 marks )
Calculate the following variable production cost variances for cost centre Y for
the period?
1. Overhead efficiency variance $.................. (fav/adv)
2. Overhead expenditure variance $............... (fav/adv)
Oak Co uses standard costing system to measure its pe rformance.
A standard cost operation system for period 8 is for one of its
product, Ash is given below. Some figure has been deliberately omitted
as marked as???

Amt Fav/Adv
Budgeted profit ???
Sales volume profit variance 5,200 Adv
Standard profit on actual sales 234,000
Direct labor rate variance ???
Direct labor efficiency variance ???
Direct material price variance 2,000 Fav
Direct material usage variance 3,000 Adv
Fixed overhead expenditure variance 2,000 Fav
Fixed overhead volume variance 4,500 Adv
Actual profit 225,000

Standard cost card

Standard cost per unit ($)
Sales price 100
Direct labor 3 hours @8 per hour 24
Direct material 5kg @7 per hour 35
Fixed overhead 3 hours @5 per hour 15
Standard profit 26

9,000 units of Ash were produced and sold in period 8. 26,000

labor hours were used at a cost of $8.50 per hour.

Task 1: (2 marks)
What is the direct labor rate variance for period 8?
1. $13,500 Fav
2. $13,000 Fav
3. $13,500 Adv
4. $13,000 Adv
Task 2: (2 martks)
1. What is the direct labor efficiency variance for period?
 $ … … … … … … … … … … (Fav/Adv)
Task 3: (2 marks)
What was the budgeted sales volume units for period 8?
1. 9,200
2. 9,568
3. 9,152
4. 8,800
Task 4: (2 marks)
What was the budgeted production volume for period 8?
………………… units
Task 5: (2 marks)
Which of the following would explain the direct material variance for period 8?
1. Production volume was higher than that expected
2. A higher quality material was use
3. A lower quality material was use
4. Production volume was lower than expected

3.Production of a company’s single product was 37,800 units in a period

during which direct production cost incurred were $79,818 on a material and
$118,998 on labor. No material inventory is held and there is no wo rking-in-
progress (WIP) at each period end.
The standard purchase price of the single raw materials is $5.20 per kg and
the standard rate of pay for the direct labor is $13.00 per hours.
The following cost variance occurred in the period.
Direct material price variance $1,506
Adv
Direct material usage variance $312 Fav
Direct labor rate variance $1,803
Adv
Direct labor efficiency variance $5,655 Fav

Task 1: (2 marks)
Complete the following extract from the standard cost card to show the
standard direct production cost per unit of product. (Two decimal places)
1. Direct material 0.40 kg at $5.20 per kg
2. Direct labor ……………… hours at $13.00 per hour
Task 2: (4 marks)
1. How many kg of the direct material were purchase and used in the
period
……………… kg
2. In the period, what was the difference between the standard labor rate
per
hour and the actual labor rate per hour (two decimal places) $ ………………
Task 3: (2 marks)
Does each of the following provide explanation for the cost variance? (Tick
whether the following statements are right or wrong)
Increased labor efficiency resulting from employment of Yes No
high skilled labor
Higher rate paid for more highly skilled labor leading to Yes No
more efficient use of materials
Reduced wastage of materials leading to more efficient Yes No
labor working
Increased market price of materials leading to Yes No
reduce efficiencies

Task 4: (2 marks)
Which of the following is/are correct reason to investigate a variance?
(Choose all the apply)
1. The potential benefit would be small
2. The variance is not recurring
3. The variance continues an adverse trend

4.A company manufactures and sells a single product, and uses

standard absorption costing system to value it’s inventory.
The standard cost card for the product is:
$ pe r unit
Direct material 4 kg at $3 per kg 12
Direct labor 2 hours at $12 per
hour 24
Fixed production 2 hours at $10 per
overhead hour 20
Total
56
Details for the product in period 1 are as follows:

Unit produce 2,000 units

Opening inventory
Direct material 400 kg
Finished goods 600 units
Closing inventories
Direct material 900 kg
Finished goods 400 units
Purchase of direct 9,000 kg costing $31,500
material
Direct labor 3,500 hours worked, paid at
$12.30 per hour

Task 1: (8 marks)
Calculate the following variances for the period 1:
Variance Fav/Adv
amount
Direct material price variance
Direct material usage variance
Direct labor rate variance
Direct labor efficiency variance

Task 2: (2 marks)
What are the closing inventory valuations for the period1?
Direct Finished
materials ($) goods ($)
a. 2,700 14,400
b. 3,150 22,400
c. 2,700 22,400
d. 3,150 14,400

5.A company manufacture and sales two products (X and Y). For period 1
following information are available concerning two product.
Product A $ per unit
Standard selling price $45.00
Standard variable cost $25.80
 Budgeted volume (production and sales) 12,600
units
Actual volume (productio n and sale) 12,200
units
Actual total variable costs $318,600

Product B $ per unit

Budgeted volume (production and sales) 17,200
units
Actual volume (production and sales) 18,600
units
Actual sales revenue $550,560
Selling price variance $7,440
Adv
Actual total variable cost $383,160
Variable cost variance $9,300
Adv

Task 1:
For product A, in period 2, calculate the following:
Variance Fav
amount /Adv
Standard contribution on actual sales
Contribution volume variance
Total variable cost variance against
flexed budget

Task 2:

For product B, in period 2, calculate the following (To two decimal

places)

Standard selling price per unit $......................

Standard variable cost per unit $......................
Actual total contribution $......................
6.H company manufactures a single product. In the last accounting period
the company budget to produce and sell 850 units. The standard costs associated
with the manufacture of product are as follows:

Direct 1.6 kg/unit $10/kg

materia l
Direct labor 2 hours/unit $5/hour

The variable overhead absorption rate was $3.80 per direct labor hours.
Fixed overhead absorption rate was 4.5 per direct labor hour based upon
budgeted production.

Actual performances for the last accounting period are as follows:

1 800 units were produced
2 1,750 direct labor hour
were worked
3 Fixed overhead incur were
$7,240
4 Variable overhead were $6,600

An analysis of the material and labor variance for the period showed:
Direct material price variance $1,425 Fav
Direct material usage variance $1,150 Adv
Direct labor rate variance $50 Fav
Direct labor efficiency variance $1,500 Adv

Task 1:
Calculate the following variance
Variance Fav/Adv
amount
Variable overhead expenditure variance
Variable overhead efficiency variance
Fixed overhead expenditure variance
Fixed overhead volume variance
Task 2:
Which of the following statement would explain the material usage variance for
the period?
1. Material usage variance is due to upgrading the skill of production worker
2. Material usage variance is due to difficulty in working with low
grade material
3. Material usage variance is due to using better quality material
Task 3:
Which of the following is the good reason to investigate the variance?
1. The potential benefit will be small
2. The variance continuous and adverse trend
3. The variance is non-recurring

7.Lundi X Co manufactures a single product AB12. The standard cost card for
the AB12 is given below.

$
Material 2.5 kg at $7 per kg 17.50
Labor 3 hours at $8.50 per hour 25.50
Variable overhead 12.00
Fixed overhead 6.00
61.00

Standard selling prices is $84.00 and Lundi X have been budgeted to make and
sell 4000 units per month.
In February the actual profit was $4,000 above budget. All variances have
been calculated expect material usage.

$
Selling price 1200
Adv
Sales volume margin 1150
Fav
 Total labor 2100
Adv
Total variable overhead 1000
Fav
Total fixed overhead 2900
Fav
Material price 1200
Fav

Lundi X uses absorption costing.

Task 1: (4 marks)
Calculate the following for February.
1. Budgeted profit $...................
2. Material usage variance $................... (Adv/Fav)

Task 2: (2 marks)
Which TWO of the following could ex plain the sales price variance for
February?
1. Lower than budgeted production volumes
2. Standard selling price set too high
3. Bulk discounts given to customers
4. Product quality increased

Task 3: (2 marks)
In March, the following variances were calculated.
$
Sales volume margin 3,000
Adv
Sales price 2,600
Fav
Material price 290 Adv
Material usage 120 Adv
Labor rate 530 Fav
Labor efficiency 210 Adv
 Fixed overhead expenditure 2,000
Fav
Fixed overhead volume 750 Adv

In the budgeted profit for March was $42,000. Which of the following is the
actual profit for the month?
1. $ 42760
2. $ 43,560
3. $ 41,510
4. $ 43,510

Task 4: (2 marks)
Complete the following sentence.
If Lundi X Co. had used marginal costing, the … … … … … … … … … … … … … … … …
… … … … ..
would have been calculated but i n a different way and
the
…………………………………………………………………… would not be included in
the
reconciliation of budgeted and actual profit.

8.A company uses standard marginal costing. Production cost variances for
period 8 were as follows:

Adv Fav.
$ $
Material price 4,000
Material usage 8,000
Labor rate 9,000
Labor efficiency 6,000
Fixed overhead 3,000
expenditure
20,000 10,000

Task 1: (8 marks)
Complete the following operating statement for period 8.
Standard cost operating statement period 8

$ Adv/Fav
 Budgeted contribution 25,000
………………………………………………………………………. ………….. …………….
Standard contribution on actual sales 20,000
………………………………………………………………………. ………….. …………….
Actual sales revenue less standard variable 21,000
cost of sales
Total variable cost variance ………….. …………….
Actual contribution …………..
Budgeted fixed costs 6,000
Fixed overhead expenditure variance 3,000 Adv
Actual fixed cost …………..
Actual profit 5,000

Task 2: (2 marks)
Which of the following variances could occur in standard marginal costing
only,
standard absorption costing or both?
Standard Standard Both
marginal absorption
costing only costing only
Fixed overhead capacity
variance
Fixed overhead expenditure
variance
Sales price variance

9.Ranjeeta Company manufactures a single product and operates a

standard costing system.
The standard direct cost per unit of the product are:
Direct material 2.5 kg at $14.20 per kg
Direct labor 0.6 hours at $12.50 per hour

Actual results i n period 6 include:

Production 6,400 units
Direct labor costs 4,060 hours worked at a total costs of
$47,096 Direct material variances were:
Price $2,680 Fav
Usage $10,650 Adv
There was no opening or closing inventory of direct material or finished foods
in period 6?

Task 1: (2 marks)
1. What was the direct labor efficiency variance in period 6?
$.............. Adv/Fav
Task 2: (4 marks)
Calculate for period 6:
1. Total actual direct material usage … … … … … .. kg
2. Total actual direct material cost $.................
Task 3: (2 marks)
Which TWO of the following could explain the direct materials usage variance
in period 6?
1. Better quality material than standard
2. Occurrence of idle time
3. Incorrect machine settings
4. Use a greater proportion of unskilled wo rkers in the direct labor mix

Task 4: (2 marks)
Which of the following variances could occur in standard marginal costing,
or standard absorption costing or both?
Standard Standard Both
marginal absorption
costing costing
Fixed overhead
expenditure variance
Fixed capacity
overhead
variance

10.The Hat’s company manufactures hats. Its management accounting system

is based on standard costing.
During period 3 in 20X3, the total number of hats was 820 of which 800 were
sold. The average selling price achieved was $18.5. The budget period 3 was
for the
production and sale of 900 hats.
There was no opening inventory.

The company’s standard costing was as follows:

$ per unit
Selling price 21.00
Total cost 12.50
Profit 8.50

Task 1: (4 marks)
Calculate the following:
$ Fav/Adv
Sales price variance
Sales volume profit variance

Task 2: (2 marks)
Following relates to Adverse sales price variance.
True False
A delay in issuing invoices
An increase in general
market prices
A deterioration in product quality
An increase in the cost of material

Task 3: (2 marks)
Following relates to Adverse sales volume variance.
True False
The introduction of an improved design by
a competitor
A decrease in the discounts allowed
to customer
An Adverse sales price variance
Sales volume being less than production
Task 4: (2 marks)
Which two of the following are reasons why a company might consider
moving away from a standard costing system?
1. It has attracted bigger customer who on an average place bigger order
2. Its range of products is expanding
3. Its direct costs are becoming most significant
4. Its customers increasingly value quality and delivery over cost

11.A company manufactures a single product and operates a standard cost

ing system.

$ $
Actual prime cost 585,516
incurred
Variances :
Material price ???
Material usage ???
Labor rate 3,636 Adv.
Labor efficiency 5,040 Fav. 1,404 Fav.
Standard prime ???
cost of production

In period:
1. 15,600 units of product were manufactured
2. 22,900 kg. of materials were purchased and used at a cost of $412,200.
The price and usage standards for materials were $17.60/kg. and
$1.5kg./unit of product respectively.
3. The standard labor rate was $14.00/hour and total labor costs of
$173,316 were incurred

Task 1: (8 marks)
Calculate the following for the period.
1. The standard material cost of actual production. $ ……………………
2. Material price variance $................... (Fav./Adv.)
3. Material usage variance $.................. (Fav./Adv.)
 4. Total standard labor cost of actual production $..................
5. Number of labor hours worked $.................

Task 2: (2 marks)
Which fixed production overhead cost variance that is reported in a
standard absorption costing system is also reported in a standard marginal
costing system.
1. Capacity variance
2. Efficiency variance
3. Expenditure variance
4. Volume variance

12..Product A is one of the products that are manufactured by a company.

The following direct cost standards was set, for each batch of 50 units of Product
A for the period just ended.
Materials: 10 kg. of material X at $17.5/ kg
5 liters of material Y at 9.2/ liter
Labor: 20 hours at $12.5/hour
Variable production overheads were absorbed at a standard rate of
$3.7/direct lab or hour.

Fixed production overhead were absorbed at a standard rate per machine

hour using the following budgeted data for the factory.
Budgeted fixed production overhead $51,000
Budgeted machine hour 1,700

Each batch of Product A requires 8 machine hours. 40 batches of Product A

were manufactured in the period just ended and the following direct resources
were
used.
Material 416 kg
X Material
Y 195 liters
Labor 838 hours
Task 1:
1. What was the standard variable production cost/unit of product A (To
two
decimal places) $.............
2. What was the standard fixed production overhead cost per unit of Product
A
(To two decimal places) $.................
3. What was the labor efficiency variance? $................. (Fav/Adv)
Task 2:
Which of the following variances are required in order to reconcile the
budgeted profit for a period with the standard profit on actual sales for the same
period?
1. Sales volume revenue variance
2. Selling price variance
3. Sales volume profit variance
4. Total cost variance
a. 1 only b. 2, 3 and 4 c. 1, 2 and 4 d. 3 only

13.SID managerial operating statement is:

$’000
Budgeted contribution 200
Sales volume contribution variance 30 Adv.
Standard contribution on actual sales 170
Sales price variance 20 Fav.
Direct material price variance 20 Fav.
Direct material usage variance 25 Adv.
Direct labor rate variance 10 Adv.
Direct labor efficiency variance 23 Adv.
Actual contribution 152
Budgeted fixed overhead 80
Fixed overhead expenditure variance 10 Fav.
Actual profit 82

1. Units sold in period were … … … . % (more/less) than budgeted. This

was
caused by the selling price being … … … … … … .. (higher/lower)
2. Total production costs were ……………… (h igher/lower) than the
flexed
budget. Direct material was purchased at …………… standard price
3. Material usage was … … … … .. (more/less) efficient than standard
Actual production and sales were 4,250 units.
4.What was the standard contribution/unit? …………………

14. A firm uses marginal costing and sells a single product. The following
are the costs and selling price of the product.
Direct materials 40kgs @ 2.25/kg $90
Direct labor 6 hours @ 20.00/ hour $120
Sales price $250
1,450 units were produce in period 2.

Task 1:
Are the following comments concerning operating statements correct?
Yes No
They provide sufficient information about cost
center managers to determ ine which variance to investigate
They are distributed to budget holders
They provide reconciliation between budgeted and
actual profit
The fixed overhead efficiency variance is not calculated
under absorption costing

Task 2:
Use the information given to complete the following operating
statement for period 2.
$ $ $ Comment
Budgeted profit 38,000
Budgeted fixed overhead 25,000
Budgeted contribution 63,000
Fav. Adv.
Sales volume variance 5,00 2… … … … … … … … … … … … …
0 …………
… ..???
Sales price variance 4,00 a.125 units more than
0 budget were sold
1… … … … … … … … … … … 62,000 b.20 units more than
……… budget were sold
…….?
Direct cost variances c.20 units less than
budget were sold
Material price 2,00 d.125 units less than
0 budget were sold
Material usage 3,00
0
 Labor rate 2,70 4… … … … … … … … … … … … …
0 …………
… … .???
Labor efficiency 3,75 a.Expenditure on material
0 was $129,500
Total direct cost variance 5,70 5,75 50 b.Expenditure on material
0 0 Adv. was $127,500
Actual contribution 61,950 c.Expenditure on material
was $132,500
Budgeted fixed overhead 25,000 d.Expenditure on material
was $131,500
3… … … … … … … … … … … 21,000
………
……?
Actual profit 5… … …
..?

Note: No option is available for the Gap 1, 3 and 5. Students have to fill
it by using their own knowledge.

15.The spreadsheets relating to period 6 is given below, some entries in the

profit reconciliation statement have been deliberately omitted and are marked as
N/A.

A B C D E F
1 Standard cost card
2 $
per unit
3 Sales price 30 Budget profit 135,000
4 Direct material 3 6 Sales volume 45,000 Fav
kg@$2 per kg variance
5 Direct labor 7 N/A 180,000
0.5 hour@$14 per hour
6 Fixe overhead 0. 8 Sales price N/A
d hour@$1 5 variance
labor 6 pe
hour r
7 Profit 9
 8 Production cost
variance
9 Actual result $ Direct material N/A
price
10 Sales revenue 640,000 Direct material N/A
20,000 units @32 usage
11 Direct material 113,100 Direct labor rate 11,000 Adv
58,000 kg @1.95 per kg
12 Direct labor 165,000 N/A 14,000 Adv
11,000 hours @$15 per
hour
13 Fixed overhead 150,000 N/A 30,000 Adv
14 Profit 211,900 Fixed overhead N/A
volume
15 Notes
16 Budgeted production N/A
and were
sales 15,000
units
17 Actual production
and sales were 20,000
units
18 Budget fixed
overhead $120,000

Task 1: (6 marks)
Calculate the following variances which should appear in the following cell in
the spreadsheet.
1. Sales price variance in cell D6? $............... (Fav/Adv)
2. Direct material usage variance in cell E10? $................ (Fav/Adv)
3. Fixed overhead volume variance in cell E14? $................. (Fav/Adv)

Task 2: (4 marks)
Select the appropriate text for each of the following cells from the
spreadsheets above.
1. Cell D5 ………………………………………………………
2. Cell D12 ……………………………………………………
3. Cell D13 ……………………………………………………
4. Cell D16 … … … … … … … … … … … … … … … … … … … .
16.Brood Co manufactures a single product. It uses standard absorption costing
to monitor its cost and revenue. The standard cost for the product is as follows:

Quantity $ Total ($)

Selling price 61
Material 2 kg 8 16
Labor 1.5 hours 6 9
Variable overhead 1.5 hours 5 7.5
Fixed overhead 1.5 hours 3 4.5

During month 4 the management accountant produced the following

reconciliation statement. Some text has been omitted and is indicated by ???

A B C D E
1 Reconciliation statement
Month 4
2 $ $
3 ??? 72,000
4 Sales volume variance 2,400 Adv
5 Sales price variance 2,900 Fav
6 ??? 72,500
7
8 Cost variances
9 Material price 1,280 Fav
10 Material usage 4,800 Adv
11 Labor rate 1,960 Adv
12 Labor efficiency 3,300 Adv
13 Variable expenditure 980 Fav
14 Variable efficiency ??? ???
15 Fixed overheads total 1,950 Adv
16 Total production cost variances 12,500 Adv
17 ??? 60,000

Other data for month 4:

1. Budgeted sales and production was 3,000 units
2. Actual fixed overheads were $15,000
3. Actual labor hours were 4,900
 4. Actual production was 2,900 units

Task 1: (2 marks)
What is the fixed overhead volume variance for month 4?
1. $4,350 Adv
2. $450 Adv
3. $1,200 Fav
4. $1,500 Adv

Task 2: (2 marks)
What is the missing label in cell A3?
1. Actual profit
2. Budgeted contribution
3. Actual contribution
4. Budgeted profit

Task 3: (5 marks)
Which of the following statements are true, which are false and which cannot
be determined from the data?
True False Cannot be
confirmed
Actual labor hours were less than budgeted
Actual sales volume is the same as
actual production volume
Actual sales price was higher than standard
The actual quality of material was
lower than standard

Task 4: (1 marks)
1. What is the value of the variable overhead efficiency variance?
$ … … … … … … … . Adverse
17.The standard marginal costing operating statement for period Pine for period
8 is given on the following spreadsheet. Text missing in the cells marked???

A B C
1 Standard marginal costing operating
2 $ Fav/Adv
3 Budgeted contribution 560,000
4 ??? 20,000 ???
5 ??? 580,000
6 Sales price variance 10,000 ???
7 Variable cost variance 120,000 Fav
8 ??? 690,000
9 Budgeted fixed cost 80,000
10 Fixed cost expenditure variance 10,000 ???
11 ??? 620,000
12

Pine has a standard selling price of $20 per unit and a standard variable cost of
$12 per unit.
Task 1: (6 marks)
1. A4: … … … … … … … … … … … … … … … … … .
2. A5: … … … … … … … … … … … … … … … … … .
3. A8: … … … … … … … … … … … … … … … … … .
4. A11: … … … … … … … … … … … … … … … … ..
5. C4: ………………
6. C6: ………………
7. C10: … … … … … .

TASK 2: (2
marks)

1. What was the budgeted number of units to be sold in period 8?

… … … … … .. units
Task 3: (2 marks)
1. $13.71
What was the actual variable cost per unit in period 8?

1. $13.71
 2. $12.66
3. $10.34
4. $10.29

18.The standard cost card for a company’s only product is given below:

$ $
Unit selling price 12
Costs per unit
Material (2 kg at 1.50 per kg) 3
Labor (0.5 hours at $4.00 per hour) 2
Variable overhead 1
Fixed overhead 2 8
Profit 4

The following profit reconciliation was produced by the company in 20X2,

when budgeted production and sales for the period was 10,000 units and
actual production and sales achieved was 11,000 units.

$ $ $
Budgeted profit 40,000
Sales volume profit variance 4,000 Fav
Budgeted profit from actual sales 44,000
Operational variance: Fav Adv
Sales price variance 5,500
Material usage variance 270
Labor efficiency 120
Labor rate 550
Fixed overhead expenditure 1,540
Fixed overhead volume 2,000
7,500 2,480 5,020 Fav
Actual profit 49,020

Task 1: (6 marks)
 1. Actual selling price (to two decimal places)? $.................
2. Actual number of hours worked? … … … … … … . Hours
3. The actual fixed overhead cost? $.................

Task 2: (2 marks)
1. If the company were to increase production by making an
additional 500 units at standard cost without any increase in sales,
calculate the effect that this would have on the profits reported
using absorption or marginal costing?
The profit under absorption costing would be
… … … … … … … … … … … … … .. the profit under marginal costing.

Task 3: (2 marks)
Which TWO of the following are reasons why a company might consider
moving away from a standard costing system?
1. Its customers increasingly value quality and delivery over cost
2. It has attracted bigger customers who, on an average, place bigger orders
3. Its range of products is
expending 4.

19.A Company uses standard marginal costing. Production cost variances for
period 8 were as follows:

Adverse Favorable
$ $
Material price 4,000
Material usage 8,000
Labor rate 9,000
Labor efficiency 6,000
Fixed overhead expenditure 3,000
20,000 10,000

Task 1: (7 marks)
Complete the following operating statements for period 8.

Standard cost operating statement period 8

 $ $ Adverse/fav
orable
Budgeted contribution 25,000
………………?
… … … … … ??? …?
Standard contribution on actual sales 20,000
………………?
… … … … .??? ….?
Actual sales revenue less standard 21,000
variable cost of sales
Total variable cost variance
….?
Actual contribution
Budgeted fixed costs 6,000
Fixed overhead expenditure variances 3,000 adverse
Actual fixed costs
….?
Actual profit 5,000

Task 2: (3 marks)
Which of the following variances could occur in standard marginal costing
only, standard absorption costing only or both?

Standard Standard Both

marginal costing absorption
only costing only
Fixed overhead
expenditure variance
Fixed overhead capacity
variance
Sales price variance

20.A company is preparing budgets for product A for months 1 and 2. The
standard cost card for product A is given below.

$
per unit
 Selling price 200
Material Z: 5 kg @$ 12 per kg 60
Skilled labor: 2 hours @ $15 30
per hour
Unskilled labor: 3 hours @ 33
11 per hour
Variable overhead: 5 hours 70
@ 14 per hour
Contribution 7

Task 1: (4 marks)
In month 1 the company plans to produce 50,000 units of product A. There is
no inventory of material Z at the beginning of month 1 but the company plans to
carry a closing inventory of 20,000 kg.
Complete the labor, material and overhead budgets for month 1.

Direct labor budget

Hours Total cost ($)
Skilled labor …………………………? ………………….?
Unskilled labor 150,000 1,650,000
Material budget
Kg Total cost ($)
Direct material Z usage 250,000 3,000,000
Direct material Z purchases ………………………? …………………….?
Overhead budget
Variable overhead ………………………? …………………….?

Task 2: (4 marks)
In month 2 only 50,000 hours of skilled labor will be available. Unskilled labor
and material Z will be in free supply.

The following levels of closing finished goods inventory of product A will be

carried.

Units
Month 1 5,000
 Month 2 4,000

Complete the following labor budget and sales budget for month 2.

Labor budget month 2

Hours Total cost ($)
Skilled labor 50,000 750,000
Unskilled labor ………………….? …………………..?

Sales budget month 2

Units Total revenue
($)
Sales …………………
? …. ?

Task 3: (2 marks)
Demand for product A in month 2 is expected to be 45,000 units. Due to
limited skilled labor supply, only 25,000 units of product A will be produced.
Which of the following actions should be used to increase sales in month 2?
1. Increase purchases of material Z
2. Subcontract some of product A’s production to another manufacture
3. Increase closing invento ry of product A
4. Increase advertising expenditure