FMA/MA - Management Accounting

Standard Costing

Class practice question

1 A company uses variance analysis to control costs and revenues. Information concerning sales is as
follows:

Budgeted selling price $15 per unit

Budgeted sales units 10,000 units
Budgeted profit per unit $5 per unit
Actual sales revenue $151,500
Actual units sold 9,800 units

What is the sales volume profit variance?

A $500 favourable
B $1,000 favourable
C $1,000 adverse
D $3,000 adverse

2 A company is reviewing actual performance to budget to see where there are differences. The
following standard information is relevant:
$
per unit
Selling price 50
––
Direct materials 4
Direct labour 16
Fixed production overheads 5
Variable production overheads 10
Fixed selling costs 1
Variable selling cost 1
––
Total costs 37
––
Budgeted sales units 3,000
Actual sales units 3,500
What was the favourable sales volume variance using marginal costing?
A $9,500
B $7,500
C $7,000
D $6,500

3 Which of the following is not a suitable basis for valuing the sales volume variance?

A Selling price
B Contribution
C Absorption rate
D Profit

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4 Last month a company budgeted to sell 8,000 units at a price of $12·50 per unit. Actual sales last month
were 9,000 units giving a total sales revenue of $117,000.

What was the sales price variance for last month?

A $4,000 favourable
B $4,000 adverse
C $4,500 favourable
D $4,500 adverse

5 A company’s budgeted sales for last month were 10,000 units with a standard selling price of $20 per unit
and a contribution to sales ratio of 40%. Last month actual sales of 10,500 units with total revenue of
$204,750 were achieved.

What were the sales price and sales volume contribution variances?
Sales price variance ($) Sales volume contribution variance ($)
A 5,250 adverse 4,000 favourable
B 5,250 adverse 4,000 adverse
C 5,000 adverse 4,000 favourable
D 5,000 adverse 4,000 adverse

6 Last month a company’s budgeted sales were 5,000 units. The standard selling price was $6 per unit with
a standard contribution to sales ratio of 60%. Actual sales were 4,650 units with a total revenue of $30,225

What were the favourable sales price and adverse sales volume contribution variances?
Sales price Sales volume contribution
$ $
A 2,325 1,260
B 2,500 1,260
C 2,325 2,100
D 2,500 2,100

7 A company uses standard absorption costing. The following data relate to last month:

Budget Actual
Sales and production (units) 1,000 900
Standard Actual
$ $
Selling price per unit 50 52
Total production cost per unit 39 40

What was the adverse sales volume profit variance last month?
A $1,000
B $1,100
C $1,200
D $1,300

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 FMA/MA - Management Accounting

8 A company operates a standard marginal costing system. Last month the company sold 200 units
more than it planned to sell.

The following data relate to last month:

Standard Actual
$ $
Selling price per unit 40 38
Variable cost per unit 30 29

What was the favourable sales volume contribution variance last month?
A $1,600
B $1,800
C $2,000
D $2,200

9 Fairfax Ltd manufactures a single product which has a standard selling price of $22 per unit. It operates a
standard marginal costing system. The standard variable production cost is $9 per unit. Budgeted annual
production is360,000 units and budgeted non-production costs of $1,152,000 per annum are all fixed.

The following data relate to last month:

Budget Actual
units units
Production 30,000 33,000
Sales 32,000 34,000

Last month the budgeted profit was $200,000 and the actual total sales revenue was $731,000.

Required:
Calculate the sales price and sales volume contribution variances for last month .

10 A company manufactures a single product. The standard selling price is $70. The monthly budgeted
contribution is $6,900, based on selling 230 units. In April the actual sales revenue was $15,200, when 200
units were sold.

The sales price variance in April was $________ favourable/adverse (delete as necessary).

The sales volume contribution variance in April was $________ favourable/adverse (delete as
necessary).

11 M Co manufactures product D. The standard marginal cost of product D is $56, and the standard selling
price is $140. During 20X5 the company planned to sell 3,000 units but actually 3,200 were sold at a price
of$120. The actual contribution margin achieved on these units was $55.

(a) The sales price variance is $________ favourable/adverse (delete as applicable).

(b) The sales volume contribution variance is $________ favourable/adverse (delete as applicable

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12 M Co sells product L. An extract from its budget for the four-week period ended 28 October 20X1
shows planned to sell 500 units at a unit price of $300, which would give a C/S ratio of 30%. that it Annual
sales were 521 units at an average selling price of $287. The actual C/S ratio averaged 26%.

(a) The sales price variance (to the nearest $1) was

A $6,773 (A)
B $6,500 (A)
C $6,500 (F)
D $6,773 (F)

(b) The sales volume contribution variance (to the nearest $1) was

A $1,890 (F)
B $1,808 (F)
C $1,638 (F)
D $1,567 (F)

13 GEM Co uses a standard absorption costing system and produces one product, the Ruby. The
following information is available for September.

Standard cost per Ruby $62

Budgeted sales (units) 14,200
Actual sales (units) 13,200
Sales price variance $2,500 (A)
Sales volume variance $9,000 (A) (based on profit margin)

Calculate the sales revenue for September

14 Watch Co uses a standard absorption costing system. The following information is available for
April.

Budgeted sales (units) 7,100

Actual sales (units) 6,600
Actual sales revenue $262,750
Sales price variance $1,250 (A)

What is the standard selling price per unit?

The following information relates to questions 15 and 16:

The standard direct material cost for a product is $50 per unit (12·5 kg at $4 per kg). Last month the actual
amount paid for 45,600 kg of material purchased and used was $173,280 and the direct material usage
variance was $15,200 adverse.

15 What was the direct material price variance last month?

A $8,800 Adverse
B $8,800 Favourable
C $9,120 Adverse
D $9,120 Favourable

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16 What was the actual production last month?

A 3,344 units
B 3,520 units
C 3,952 units
D 4,160 units

The following information relates to questions 17 and 18:

The standard direct material cost per unit for a product is calculated as follows:

10·5 litres at $2·50 per litre

Last month the actual price paid for 12,000 litres of material used was 4% above standard and the direct
material usage variance was $1,815 favourable. No stocks of material are held.

17 What was the adverse direct material price variance for last month?
A $1,000
B $1,200
C $1,212
D $1,260

18 What was the actual production last month (in units)?

A 1,074
B 1,119
C 1,212
D 1,258

The following information relates to questions 19 and 20:

A company has a budgeted material cost of $125,000 for the production of 25,000 units per month. Each
unit is budgeted to use 2 kg of material. The standard cost of material is $2·50 per kg.
Actual materials in the month cost $136,000 for 27,000 units and 53,000 kg were purchased and used.

19 What was the adverse material price variance?

A $1,000
B $3,500
C $7,500
D $11,000

20 What was the favourable material usage variance?

A $2,500
B $4,000
C $7,500
D $10,000

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21 Extracts from P Co's records for last month are as follows.

Budget Actual
Production 7,000 units 7,200 units
Direct material cost $42,000 $42,912

What is the total direct material cost variance?

A $288 (F)
B $288 (A)
C $912 (A)
D $1,200 (F)

22 The following information relates to April production of product CK:

Actual Budget
Units produced 580 600
Input of material (kg) 1,566 1,500
Cost of material purchased and input $77,517 $76,500

What is the materials price variance?

A $2,349 favourable
B $3,366 adverse
C $5,742 adverse
D $5,916 adverse

23 T Co uses a standard costing system, with its material inventory account being maintained at
standard cost. The following details have been extracted from the standard cost card in respect of
direct materials:

8 kg @ $0.80/kg = $6.40 per unit

Budgeted production in April was 850 units.
The following details relate to actual materials purchased and issued to production during April when
actual production was 870 units:

Materials purchased 8,200 kg costing $6,888

Materials issued to production 7,150 kg

(a) The direct material price variance for April was

A $286 (A)
B $286 (F)
C $328 (A)
D $328 (F)

(b) The direct material usage variance for April was

A $152 (F)
B $152 (A)
C $159.60 (A)
D $280 (A)

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24 Rainbow Co has prepared the following standard cost information for one unit of product
Orange.

Direct materials 2kg @ $13/kg $26.00

Direct labour 3.3 hours @ $4/hour $13.20
Fixed overheads 4 hours @ $2.50 $10.00
Actual results for the period were recorded as follows:
Production 4,820 units
Materials – 9,720 kg $121,500
Labour – 15,800 hours $66,360
Fixed overheads $41,700

All of the materials were purchased and used during the period.

The direct material price and usage variances are:

Material price $________ (to the nearest $)

Material usage $________ (to the nearest $)

25 Sunshine Co has a standard ingredients cost of $14 for a single unit of production. The standard
ingredient price is $7 per litre.

During May 856 units were produced. The ingredients cost was $12,376 for a total of 1,820 litres.
Favourable Adverse

The ingredients usage variance for May was $ __________ _________

The ingredients price variance for May was $ __________ _________

26 The budgeted material cost for Product Q is $20 per kg and 15kg are budgeted per unit. In May the
budgeted number of units of Q was 12,500. The actual number of units produced was 11,750 at a cost of
$2,961,000 and 12kg per unit were used.

What is the total material variance?

A $564,000 (F)
B $564,000 (A)
C $705,000 (A)
D $705,000 (F)

27 Spendthrift Co purchased 6,850 kgs of material at a total cost of $32,195. The material price variance
was $1,370 adverse.

The standard price per kg was $ ________ (to the nearest cent)

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28 ABC Co uses standard costing. It purchases a small component for which the following data are
available.

Actual purchase quantity 6,800 units

Standard allowance for actual production 5,440 units
Standard price 85 cent/unit
Purchase price variance (adverse) ($544)

What was the actual purchase price per unit?

A 75c
B 77c
C 93c
D 95c

29 In a period, 11,280 kilograms of material were used at a total standard cost of $46,248. The material
usage variance was $492 adverse.

What was the standard allowed weight of material for the period?

A 10,788 kgs
B 11,160 kgs
C 11,280 kgs
D 11,400 kgs

30 Last month 27,000 direct labour hours were worked at an actual cost of $236,385 and the standard direct
labour hours of production were 29,880. The standard direct labour cost per hour was $8·50.

What was the labour efficiency variance?

A $17,595 Adverse
B $17,595 Favourable
C $24,480 Adverse
D $24,480 Favourable
The following information relates to questions 31 and 32:

A company operating a standard costing system has the following direct labour standards per unit
for one of its products:

4 hours at $12·50 per hour

Last month when 2,195 units of the product were manufactured, the actual direct labour cost for the 9,200
hours worked was $110,750.

31 What was the direct labour rate variance for last month?

A $4,250 favourable
B $4,250 adverse
C $5,250 favourable
D $5,250 adverse

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32 What was the direct labour efficiency variance for last month?

A $4,250 favourable
B $4,250 adverse
C $5,250 favourable
D $5,250 adverse

33 The following information relates to labour costs for the past month:

Budget Labour rate $10 per hour

Production time 15,000 hours
Time per unit 3 hours
Production units 5,000 units
Actual Wages paid $176,000
Production 5,500 units
Total hours worked 14,000 hours
There was no idle time.

What were the labour rate and efficiency variances?

Rate variance Efficiency variance
A $26,000 adverse $25,000 favourable
B $26,000 adverse $10,000 favourable
C $36,000 adverse 1 $2,500 favourable
D $36,000 adverse $25,000 favourable

34 Extracts from L Co's records for November are as follows.

Budget Actual
Production 9,840 units 9,600 units
Direct labour cost $39,360 $43,200

What is the total direct labour cost variance?

A $960 (F)
B $3,840 (A)
C $4,800 (F)
D $4,800 (A)

35 S Co has extracted the following details from the standard cost card of one of its products.

Direct labour 4.5 hours @ $6.40 per hour

During March, S Co produced 2,300 units of the product and incurred direct wages costs of $64,150. The
actual hours worked were 11,700.

The direct labour rate and efficiency variances were

Rate Efficiency
$ $
A 10,730 (F) 8,640 (F)
B 10,730 (F) 8,640 (A)
C 10,730 (A) 8,640 (A)
D 10,730 (F) 7,402 (A)

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36 Z Co uses a standard costing system and has the following labour cost standard in relation to one
of its products.

4 hours skilled labour @ $6.00 per hour $24.00

During October, 3,350 of these products were made which was 150 units less than budgeted. The labour
cost incurred was $79,893 and the number of direct labour hours worked was 13,450.

The direct labour variances for the month were

Rate Efficiency
A $807 (F) $297 (A)
B $807 (F) $300 (A)
C $807 (F) $3,300 (A)
D $807 (A) $300 (F)

37 R Co uses a standard costing system. The budget for one of its products for September includes direct
labour cost (based on 4 hours per unit) of $117,600. During September 3,350 units were made which was
150 units less than budgeted. The direct labour cost incurred was $111,850 and the number of direct labour
hours worked was 13,450.

(a) The direct labour rate variance for the month was

A $710 (F)
B $1,130 (F)
C $1,130 (A)
D $5,750 (A)

(b) The direct labour efficiency variance for the month was

A $415.80 (A)
B $420.00 (A)
C $420.00 (F)
D $710.00 (F)

38 Barney Co expected to produce 200 units of its product, the Bone, in 20X3. In fact 260 units were
produced. The standard labour cost per unit was $70 (10 hours at a rate of $7 per hour).The actual labour
cost was $18,600 and the labour force worked 2,200 hours although they were paid for 2,300 hours.

(a) What is the direct labour rate variance for Barney Co in 20X3?

A $400 (A)
B $2,500 (F)
C $2,500 (A)
D $3,200 (A)

(b) What is the direct labour efficiency variance for Barney Co in 20X3?

A $400 (F)
B $2,100 (F)
C $2,800 (A)
D $2,800 (F)

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(c) What is the idle time variance?

A $700 (F)
B $700 (A)
C $809 (A)
D $809 (F)

39 Rainbow Co has prepared the following standard cost information for one unit of product
Orange.

Direct materials 2kg @ $13/kg $26.00

Direct labour 3.3 hours @ $4/hour $13.20
Fixed overheads 4 hours @ $2.50 $10.00

Actual results for the period were recorded as follows:

Production 4,820 units

Materials – 9,720 kg $121,500
Labour – 15,800 hours $66,36
Fixed overheads $41,700

The direct labour rate and efficiency variances are:

Labour rate $________

Labour efficiency $________

40 In a period 4,800 units were made and there was an adverse labour efficiency variance of $26,000.
Workers were paid $8 per hour, total wages were $294,800 and there was a nil rate variance.

Calculate standard hours per unit.

41 During a period 17,500 labour hours were worked at a standard cost of $6.50 per hour. The labour
efficiency variance was $7,800 favourable.

How many standard hours were produced?

A 1,200
B 16,300
C 17,500
D 18,700

42 In a period 12,250 units were made and there was a favourable labour efficiency variance of $11,250. If
41,000 labour hours were worked and the standard wage rate was $6 per hour, how many standard hours
(to two decimal places) were allowed per unit?

A 3.19
B 3.35
C 3.50
D 6.00

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43 The standard variable production overhead cost of product B is as follows.

4 hours at $1.70 per hour = $6.80 per unit

During period 3 the production of B amounted to 400 units. The labour force worked 1,690 hours, of which
30 hours were recorded as idle time. The variable overhead cost incurred was $2,950.

(a) The variable production overhead expenditure variance for period 3 was

A $77 (A)
B $128 (A)
C $128 (F)
D $230 (A)

(b) The variable production overhead efficiency variance for period 3 was

A $102 (F)
B $102 (A)
C $105 (A)
D $153 (A)

44 The variable overhead production cost of product X is as follows.

2 hours at $1.50 = $3 per unit

During the month, 400 units of product X were made. The labour force worked 820 hours, of which 60
hours were recorded as idle time. The variable overhead cost was $1,230.

The variable overhead expenditure variance is $________

The variable overhead efficiency variance is $________

45 Extracts from V Co's records for June are as follows.

Budget Actual
Production 520 units 560 units
Variable production overhead cost $3,120 $4,032
Labour hours worked 1,560 2,240

(a) The variable production overhead total variance for June is:

A $240 (A)
B $672 (A)
C $672 (F)
D $912 (A)

(b) The variable production overhead expenditure variance for June is:

A $448 (F)
B $448 (A)
C $672 (A)
D $912 (A)

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(c) The variable production overhead efficiency variance for June is:

A $1,008 (A)
B $1,120 (A)
C $1,120 (F)
D $1,360 (A)

46 X40 is one of many items produced by the manufacturing division. Its standard cost is based on
estimated production of 10,000 units per month. The standard cost schedule for one unit of X40 shows that
2 hours of direct labour are required at $15 per labour hour. The variable overhead rate is $6 per direct
labour hour. During April, 11,000 units were produced; 24,000 direct labour hours were worked and
charged; $336,000 was spent on direct labour; and $180,000 was spent on variable overheads.

(a) The direct labour rate variance for April is

A $20,000 (F)
B $22,000 (F)
C $24,000 (A)
D $24,000 (F)

(b) The variable overhead efficiency variance for April is

A $12,000 (A)
B $12,000 (F)
C $15,000 (A)
D $15,000 (F)

47 A company uses a standard absorption costing system. Last month budgeted production was 8,000 units
and the standard fixed production overhead cost was $15 per unit. Actual production last month was 8,500
units and the actual fixed production overhead cost was $17 per unit.

Calculate total adverse fixed production overhead variance for last month.

48 A company operates a standard absorption costing system. The standard fixed production
overhead rate is $15 per hour.

The following data relate to last month:

Actual hours worked 5,500
Budgeted hours 5,000
Standard hours for actual production 4,800

What was the fixed production overhead capacity variance?

A $7,500 adverse
B $7,500 favourable
C $10,500 adverse
D $10,500 favourable

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49 A company operates a standard absorption costing system in which the standard fixed production
overhead rate is $9 per hour.

The following data relate to last month:

Budgeted hours 8,000

Standard hours for actual production 8,200
Actual hours worked 8,400

What was the fixed production overhead capacity variance for last month?
A $1,800 Adverse
B $1,800 Favourable
C $3,600 Adverse
D $3,600 Favourable

50 A company's budgeted fixed overhead for the last quarter of the financial year was $280,000 for 7,000
units of output. It actually spent $284,400 manufacturing 7,200 units.

What was the fixed overhead volume variance?

A $ 8,000 adverse
B $ 4,400 adverse
C $ 7,900 favourable
D $ 8,000 favourable

51 A manufacturing company operates a standard absorption costing system. Last month 25,000 production
hours were budgeted and the budgeted fixed production overhead cost was $125,000. Last month the actual
hours worked were 24,000 and the standard hours for actual production were 27,000.

What was the fixed production overhead capacity variance for last month?

A $5,000 Adverse
B $5,000 Favourable
C $10,000 Adverse
D $10,000 Favourable

52 A company has the following budget and actual data.

Budgeted fixed production overhead cost $380,000

Budgeted production (units) 76,000
Budgeted labour hours 76,000
Actual fixed production overhead cost $409,750
Actual production (units) 74,500
Actual labour hours 76,500

The fixed production overhead expenditure variance is $________

The fixed production overhead volume efficiency variance is $________

The fixed production overhead volume capacity variance is $________

The fixed production overhead volume variance is $________

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53 A company has budgeted to make and sell 4,200 units of product X during the period.

The standard fixed overhead cost per unit is $4.

During the period covered by the budget, the actual results were as follows.
Production and sales 5,000 units
Fixed overhead incurred $17,500
The fixed overhead variances for the period were

Fixed overhead Fixed overhead

expenditure variance volume variance
A $700 (F) $3,200 (F)
B $700 (F) $3,200 (A)
C $700 (A) $3,200 (F)
D $700 (A) $3,200 (A)

54 A company manufactures a single product, and relevant data for December is as follows.
Budget/standard Actual
Production units 1,800 1,900
Labour hours 9,000 9,400
Fixed production overhead $36,000 $39,480

The fixed production overhead capacity and efficiency variances for December are:
Capacity Efficiency
A $1,600 (F) $400 (F)
B $1,600 (A) $400 (A)
C $1,600 (A) $400 (F)
D $1,600 (F) $400 (A)

55 A company uses a standard absorption costing system. Last month budgeted production was 8,000 units
and the standard fixed production overhead cost was $15 per unit. Actual production last month was 8,500
units and the actual fixed production overhead cost was $17 per unit.

What was the total adverse fixed production overhead variance for last month?

A $7,500
B $16,000
C $17,000
D $24.500

56 A cost centre had an overhead absorption rate of $4.25 per machine hour, based on a budgeted activity
level of 12,400 machine hours. In the period covered by the budget, actual machine hours worked were 2%
more than the budgeted hours and the actual overhead expenditure incurred in the cost centre was $56,389.

What was the total over or under absorption of overheads in the cost centre for the period?

A $1,054 over absorbed

B $2,635 under absorbed
C $3,689 over absorbed
D $3,689 under absorbed

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57 A company uses standard marginal costing. Last month the standard contribution on actual sales was
$30,000 and the following variances arose:

Total variable costs variance $6,000 adverse

Sales Price variance $7,000 favourable
Sales volume contribution variance $3,000 adverse

What was the actual contribution for last month?

58 A company uses standard marginal costing. Last month, when all sales were at the standard selling
price, the standard contribution from actual sales was $50,000 and the following variances arose:

Total variable cost variance $9,500 Adverse

Total fixed costs variance $10,000 favourable
Sales volume contribution variance $4,000 favourable

What was the actual contribution for last month?

59 A company uses standard marginal costing. Last month the Budgeted contribution was $30,000 and the
following variances arose:

Total variable costs variance $4,000 adverse

Sales Price variance $2,000 favourable
Sales volume contribution variance $1,000 adverse

What was the actual contribution for last month?

60 A company uses standard marginal costing. Last month, when all sales were at the standard selling
price, the Budgeted contribution was $50,000 and the following variances arose:

Total variable cost variance $7,500 Adverse

Total fixed costs variance $8,000 favourable
Sales volume contribution variance $3,000 favourable

What was the actual contribution for last month?

61 The budgeted contribution for last month was $65,200 but the following variances arose:

$
Sales price variance 4,100 adverse
Sales volume contribution variance 2,100 adverse
Direct material price variance 3,986 favourable
Direct material usage variance 3,200 adverse
Direct labour rate variance 4,090 adverse
Direct labour efficiency variance 1,512 adverse
Variable overhead expenditure variance 2,216 favourable
Variable overhead efficiency variance 2,465 adverse

What is the actual contribution for last month?

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62 Below is a statement of variances for a business:

Sales price variance $1,500F

Sales volume variance $2,100A
Materials price variance $4,200A
Materials usage Variance $1,500F
Labour rate variance $900F
Labour efficiency Variance $450A
Fixed overhead expenditure variance $1,750F
Fixed overhead volume variance $1,800A

If the budgeted profit for the period was 150,000, what was the actual profit?

63 Below is a statement of variances for a business:

Sales price variance $200F

Sales volume variance $350F
Materials price variance $250F
Materials usage Variance $120A
Labour rate variance $450A
Labour efficiency Variance $800A
Fixed overhead expenditure variance $600F
Fixed overhead volume variance $860A

If the actual profit for the period was $9,170 what was the budget profit?

64 Marvel Co manufactures toys. The following figures are available:

• 400 kg of direct materials were actually purchased

• The standard cost per kg is $1.25, leading to a standard cost of actual purchases of
$2,125
• The direct materials price variance is $550 adverse
• The direct materials usage variance is $400 favourable

Required:

(a) From the information provided calculate

(i) The actual price paid per kg for the direct material (to 2 decimal places) (2.5 marks)

(ii) The standard quantity that should have been used for actual production (to the nearest
whole kg) (2.5 marks)

(b) Which of the following is likely to lead to the variances stated above?

A lower quality direct material has been purchased

B higher quality direct material has been purchased (1 mark)

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(c) The following graph shows the standard price and quantity and the actual and price
and quantity relating to the direct material for the manufacture.

Which area correctly represents the direct material usage variance?

A APWZSP
B APYXSP
C AQWYSQ
D AQZXSQ (2 marks)

(d) The following spreadsheet has started to be completed for direct materials.

What will be the formula for the materials price variance?

A = (C5 × C4) – (C5 × B4)
B = (C5 × B4) – (B2 × B4)
C = (C5 × C4) – (B2 × C4)
D = (C5 × B4) – (C2 × B3 × B4) (2 marks)

(Total: 10 marks)

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 FMA/MA - Management Accounting

Prepared by: Muzzammil Malik 20

 FMA/MA - Management Accounting

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Prepared by: Muzzammil Malik 21