Unit: Management accounting
Sign in to download the full Topic PDF and enable offline revision mode.
Login to AccessPractice CPA Management accounting Standard costing and variance analysis questions with detailed answers and explanations.
Access past exam questions by topic, improve your understanding, and download PDF for offline revision.
| Standard cost (for one unit) | Sh. |
| Direct materials: 10 units @Sh.1.50 | 15 |
| Direct labour: 5 hours @ Sh.8 | 40 |
| Production overheads: 5 hours @ Sh.10 | 50 |
| 105 | |
Actual figures (for whole activity): | |
| Direct materials: Sh.6,435 | |
| Direct labour: Sh.16,324 |
Analysis of variances: | ||
| Direct materials: | Price | Sh.585(A) |
| Usage | Sh.375 (F) | |
| Direct labour: | Rate | Sh.636 (F) |
| Efficiency | Sh.360 (A) | |
| Production overheads: | Expenditure | Sh.400 (F) |
| Volume | Sh.750 (F) |
| Actual | Budgeted | |
| Selling price per unit (Sh.) | 2,600 | 3,100 |
| Variable cost per unit (Sh.) | 1,000 | 1,000 |
| Output and sales (units) | 8,200 | 8,700 |
| Total fixed overheads (Sh.) | 4,510,000 | 5,220,000 |
| Sh. | |
| Direct material (15kgs at Sh.260 per kg) | 3,900 |
| Direct wages (5 hours at Sh.60 per hour) | 300 |
| Fixed production overheads | ....500 |
| 4,700 |
| 1 | The fixed overheads included in the standard cost is based on an expected monthly output of 1,000 units. |
| 2 | Fixed production overheads are absorbed on the basis of direct labour hours. |
| 3 | During the month of November 2023, the actual results were as follows: |
| 3 | Production | 890 units |
| Material | 12,100 units costing Sh.1,835,500 | |
| Direct wages | 4,200 hours worked for Sh.241,500 | |
| Fixed production overheads | Sh.470,000 |
| Actual costs incurred: | Sh.“000” |
| Direct material (1,188 kilograms) | 11,286 |
| Direct labour (5,760 hours) | 41,760 |
| Variable production overheads | 12,096 |
| Fixed production overheads | 48,600 |
Variances: | Sh.“000” |
| Direct material price variance | 594 Favourable |
| Direct material usage variance | 1,080 Adverse |
| Direct labour rate variance | 1,440 Adverse |
| Direct labour efficiency variance | 2,520 Adverse |
| Variable overhead expenditure variance | 576 Adverse |
| Variable overhead efficiency variance | 720 Adverse |
| Fixed overhead expenditure variance | 900 Favourable |
| Fixed overhead volume variance | 4,500 Favourable |
| 1 | The budgeted production and sales for the month amounted to 6,000 units. |
| 2 | The standard selling price of product “XV” per unit is Sh.13,200. |
| 3 | The variable standard manufacturing costs per unit are as follows: |
| 3 | Direct materials (2.5 kgs at Sh.1,690 per kg) | Sh. 4,225 |
| Direct labour (1.25 hours at Sh.1,880 per hour) | 4,350 | |
| Variable production overhead (1.25 direct labour hours at Sh.1,340 per hour) | 1,675 |
| 4 | The actual results for the month of March 2023 were as follows: |
| Production in units | 6,380 | |
| Sh."000" | ||
| Sales (5,640 units) | 81,075 | |
| Direct materials purchased and used (14,730 kgs) | 27,987 | |
| Direct labour (8,535 hours) | 15,363 | |
| Variable production overheads | 8,974 |
| 5 | The variable production overheads are absorbed on the basis of direct labour hours. |
| 6 | The opening and closing inventories of finished goods are valued at the standard variable manufacturing cost per unit. |
| Sh. | |
| Direct materials (15 square metres at Sh.30 per square metre) | 450 |
| Direct labour (5 hours at Sh.100 per hour) | 500 |
| Variable overheads (5 hours at Sh.20 per hour) | 100 |
| Fixed overheads (5 hours at Sh.10 per hour) | 50 |
| Actual production | 36,000 units |
| Actual cost incurred: | Sh. |
| Direct material (300,000 kgs) | 8,400,000 |
| Direct labour (64,000 hours) | 5,440,000 |
| Variable production overheads | 1,520,000 |
| Variances | |
| Direct materials price | 300,000 (Favourable) |
| Direct materials usage | 180,000 (Adverse) |
| Direct labour rate | 160,000 (Adverse) |
| Direct labour efficiency | 320,000 (Favourable) |
| Variable production overhead expenditure | 120,000 (Adverse) |
| Variable production overhead efficiency | 80,000 (Favourable) |
| 1 | Budgeted output for the year | 9,800 units |
| 2 | Standard details for one unit: | |
| 40 square metres at Sh.530 per square metre. | |
| ||
| .......- Bonding cost centre | 48 hours at Sh.250 per hour | |
| .......- Finishing cost centre | 30 hours at Sh.190 per hour | |
| 3 | Budgeted costs and hours per annum: | |
| 3 |
| Hours | Sh. |
| ....Bonding cost centre | 500,000 | 3,750,000 | |
| ....Finishing cost centre | 300,000 | 1,500,000 | |
| |||
| ....Production | 39,200,000 | ||
| ....Selling and distribution | 19,600,000 | ||
| ....Administration | 9,800,000 |
| Sh. | |
| Direct materials | 20 |
| Direct labour (6 hours at Sh.8 per hour) | 48 |
| Production overhead | 24 |
| Total | 92 |
| 1 | The budgeted and actual activity levels for the month of April 2020 were as follows: |
| Budgeted units | Actual units | ||
| Sales Production | 25,000 25,000 | 25,000 26,000 |
| 2 | The actual sales and variable costs for the month of April 2020 were as follows: |
| Sh. | ||
| Sales | 2,995,000 | |
| Direct materials (purchased and used) | 532,800 | |
| Direct labour (150,000 hours) | 1,221,000 | |
| Variable production overhead | 614,000 |
| Units produced | 7,200 | |
| Sh. | ||
| Materials used (420kgs) | 8,450 | |
| Labour costs (9,100 hours) | 35,280 | |
| Various overheads | 34,200 | |
| Fixed costs | 28,500 | |
| Direct material price variance | 370 | (favourable) |
| Direct material usage variance | 252 | (favourable) |
| Direct labour rate variance | 1,120 | (favourable) |
| Direct labour efficiency variance | 1,040 | (favourable) |
| Variable overhead expenditure variance | 2,350 | (adverse) |
| Variance overhead efficiency variance | 910 | (favourable) |
| Fixed overhead variance | 500 | (adverse) |
| 1 | The standard cost card and the budget for the period were misplaced and could not be recovered. |
| 2 | The accountant recalls that the budgeted output was 7,000 units. |
| 1 | Standard mixture | 70% | Ingredient Y |
| 30% | Ingredient X | ||
| 2 | Standard prices | Ingredient X | Sh.480 per kg. |
| Ingredient Y | Sh.130 per kg. |
| 3 | Opening and closing stock of ingredients X and Y for the month of October 2018 are as follows: |
| Opening stock | Ingredient X | 100 kgs | |
| Ingredient Y | 60 kgs | ||
| Closing stock | Ingredient X | 110 kgs | |
| Ingredient Y | 50 kgs |
| 4 | Total purchases for ingredients X and Y are as follows: |
| Ingredient X | 300 kgs at Sh.146,500 | ||
| Ingredient Y | 100 kgs at Sh.12,500 |
| 5 | The mixtures melted amounted to 400 kgs while castings produced were 375 kgs. |
| 6 | Standard loss is 10% of input. |
| Materials | 1 kg at Sh.4 per kg per unit |
| Labour | 25 hours (100 units) at Sh.8 per hour |
| Variable overheads | Sh.48,000 for budget period |
| Fixed overheads | Sh.120,000 for budget period |
| Output | 24,000 units |
| Materials issued | 2,000 kgs at Sh.3.50 per kg |
| Actual production | 1,800 units |
| Actual wages | 480 hours at Sh.8.50 per hour |
| Actual variable overheads | Sh.4,000 |
| Actual fixed overheads | Sh.10,600 |
| Actual hours worked | 8,250 |
| Budgeted hours | 9,000 |
| Standard hours of actual production | 7,800 |
| Actual.fixed.overheads.expenditure.(Sh.) | 211,000 |
| Month Sales.(units) | January 10,000 | February 12,000 | March 14,000 | April 15,000 | May 15,000 | June 16,000 |
| 1 | Finished goods inventory at the end of each month is expected to be 20% of budgeted sales quantity for the following month. |
| 2 | Finished goods inventory was 2,700 units on 1 January 2016. |
| 3 | There would be no work in progress at the end of any month. |
| 4 | Each unit of finished product requires two types of raw materials as follows:
|
| 5 | Materials on hand on 1 January 2016 was 19,000 kgs of material X and 29,000 kgs of material Y. |
| 6 | Monthly closing stock of material is budgeted to be equal to half of the requirements of next month's production. |
| 7 | Budgeted direct labour hour per unit of finished product is 3/4 hour. |
| 8 | Budgeted direct labour cost for the first quarter of the year 2016 is Sh.1,089,000. |
| 9 | Actual data for the quarter ended 31 March 2016 is as follows: Actual production quantity: 40,000 units Direct material cost (Purchase cost based on materials actually issued to production)
Actual direct labour cost: Sh.1,312,000 |
| (a) | (i) | Monthly production quantity for the quarter ended 31 March 2016. |
| (ii) | Monthly raw material consumption quantity budget for the four months from January 2016 to April 2016. | |
| (iii) | Materials purchase quantity budget for the quarter ended 31 March 2016. | |
(b) | Compute the following variances: | |
| (i) | Material price variance. | |
| (ii) | Material usage variance. | |
| (iii) | Direct labour rate variance. | |
| (iv) | Direct labour efficiency variance. | |
| Selling.price Materials Labour | 2.kilograms.at.Sh.10.per.kilogramme 3 hours at Sh.24 per hour | Sh. 136 20 72 |
| 1 | The budgeted sales for the month of October 2015 were 38,000 units. |
| 2 | The actual results for the month of October 2015 were as follows: |
| Production.and.saies................. Selling price per unit Materials.(76,000.kilogrammes) Labour (114,000 hours paid) | 36,000 units Sh.134 Sh.754,000 Sh.2,656,000 |
| 3 | The company operates a standard costing system and a just-in time (JIT) purchasing and production system. |
| 1 | Actual cost data: Direct materials purchased (36000 Kgs.) Direct wages (6800 hours) Variable production overheads Fixed production overheads .................................................................. | Sh. 1,890,000 2,210,000 620,000 1,880,000 |
| 2 | Output during the period was 3500 units of product Y. |
| 3 | The standard production units were budgeted at 4800 units. |
| 4 | The standard cost data per unit is as follows: |
Direct materials purchased (Sh.500 per Kg.) Direct wages (2 hours) Variable production overheads Fixed production overheads ......................................................................... | Sh. 500 600 200 400 1,700 |
| 5 | Labour records show 6200 hours were worked. 600 hours were recorded as idle time due to machine breakdown. |