Unit: Management accounting
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Login to Access| 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. |