Department of Commerce

University of Jaffna- Sri Lanka

COM 22031: Management Accounting
Practice Questions
Question No: 01
Budgeted production of product ‘Mark’ is 650 units each period. The standard cost card
for product Mark contains the following information:
Rs / Unit
Ingredients (12 litres @Rs. 4 per litre) 48
Direct labour (3 hours @ Rs.9 per hour) 27
Variable production overhead (3 hours @ Rs.2 per hour) 06
During the latest period 670 units of product Mark were produced. The actual results
recorded were as follows:
Ingredients purchased and used 8,015 litres Rs. 33,663
Direct labour 2,090 hours Rs. 17,765
Variable production overhead Rs. 5,434
Required to calculate appropriate variances for material, labour and variable production
overhead.

Question No: 02
Linton Dias Ltd makes a single product and has the following budgeted/standard
information:
Budgeted production 1,000 units
Labour hours per unit 03 hours
Labour rate per hour Rs.8

Actual Results:
Output 1,100 units
Hours paid for and worked 3,400 hours
Labour cost Rs. 28,300
Calculate rate and efficiency variances for labour.

Question No: 03
Avaya Ltd makes a single product with the following information:
Budgeted /standard:
Output 1,000 units
Hours 6,000 hours
Labour cost Rs. 42,000
Actual:
Output 900 units

Practice Questions (COM 22031) Page 1

 Hours paid 5,500 hours
Hours worked 5,200
Labour cost Rs. 39,100

Calculate rate, efficiency and idle time variances for labour.

Question No: 04
Tamin Iqbal Plc experiences seasonal demand for its product. During the next period
the company expects that there will be an average level of idle time equivalent to 20% of
hours paid. The company’s standard labour rate is Rs. 9 per hour before the adjustment
for idle time payments.
The standard time to produce one unit of output is 3 active (productive) hours.
Actual results for the period were as follows:
Number of units produced 3,263
Actual hours paid for 14,000
Actual active (productive) hours 10,304

Required to calculate;
 the idle time variance
 the labour efficiency variance

Question No: 05
Extracts from the standard cost card for product M are as follows:
‘Rs’
Direct labour (14 hours @Rs.11 per hour) 154
Variable production overhead (14 hours @Rs. 3 per hour) 42

During the latest period, 390 units of product M were produced. Details concerning direct
labour and variable production overhead are as follows:
Direct labour (amount paid for 5,720 hours, Rs.68, 640)
Variable production overhead cost incurred, Rs. 16,280
Of the 5,720 labour hours paid for, 170 hours were recorded as idle time due to a
machine breakdown.
Calculate the following variances;
 the labour rate variance
 the labour efficiency variance
 the idle time variance
 the variable production expenditure variance
 the variable production efficiency variance

Practice Questions (COM 22031) Page 2

Question No: 06
The following data is available for the most recent month of sales:
Budget Actual
Sales units 320 380
Selling price per unit (Rs) 45 42
Total cost per unit (Rs) 23 22
Variable cost per unit (Rs) 17 15
Required to calculate the,
 Sales price variance,
 Sales volume variance using absorption costing, marginal costing and standard
revenue per unit.

Question No: 07
Extracts from the standard cost card for Product- O are as follows:
‘Rs’
Direct labour (14 hours @ Rs.11 per hour 154
Variable production overhead (14 hours @ Rs.3 per hour) 42

During the period, 390 units of Product- O were produced. Details concerning direct
labour and variable production overhead are as follows:
Direct labour amount paid for 5,720 hours, Rs.68,640
Variable production overhead cost incurred Rs.16,280
Of the 5,720 labour hours paid for, 170 hours were recorded as idle time due to a
machine breakdown.
Required to calculate all relevant variances.

Question No: 07
Omega manufacturing company produces a single product, which is known as ‘Beta’.
The product requires a single operation and the standard cost for this operation is
presented in the following standard cost card:
Standard cot card for product Beat
‘Rs’
Direct materials:
2kg of A at Rs. 10 per kg 20
1kg of B at Rs. 15 per kg 15
Direct Labour (three hours at Rs.9 per hour) 27
Variable overhead (three hours at Rs. 2 per direct labour hour) 06
Total standard variable cost 68

Practice Questions (COM 22031) Page 3

 Standard contribution margin 20
Standard selling price 88

Omega company plan to produce 10,000 units of Beta in the month of April and the
budgeted costs based on the information contained in the standard cost card are as
follows:
Budgeted based on the above standard costs and an output of 10,000 units.
‘Rs’ ‘Rs’ ‘Rs’
Sales (10,000 units of Beta at Rs.88 per unit) 880,000
Direct materials:
A: 20,000 kg at Rs.10 200,000
B: 10,000 kg at Rs.15 per kg 150,000 350,000
Direct labour (30,000 hours at Rs.9 per hour) 270,000
Variable overheads (30,000 hours at Rs. 2 per direct 60,000 680,000
labour hour)
Budgeted contribution 200,000
Fixed overheads 120,000
Budgeted profit 80,000

Annual budgeted fixed overheads are Rs. 1,440,000 and are assumed to be incurred
evenly throughout the year. The company uses a variable / marginal costing system for
internal profit measurement purposes.
The actual results for April are:
‘Rs’ ‘Rs’
Sales (9,000 units at Rs.90) 810,000
Direct materials:
A: 19,000 kg at Rs.11 per kg 209,000
B: 10,100 kg at Rs.14 per kg 141,400
Direct labour (28,500 hours at Rs. 9.60 per hour) 273,600
Variable overheads 52,000 676,000
Contribution 134,000
Fixed overheads 116,000
Profit 18,000
Manufacturing overheads are charged to production on the basis of direct labour hours.
Actual production and sales for the period were 9,000 units.
Required:
 calculate all relevant variances
 prepare a statement reconciling the profit that was originally budgeted to actual
profit achieved

Practice Questions (COM 22031) Page 4