Standard Costing Problem 1:

Given for a factory:

Normal number of workers 100

Number of hours paid for in a week 80

Standard Rate of wages per hour Rs.1.60

Standard Output of the department

per hour taking into account normal idle time 40 units

In the first week of January 2003 it was ascertained that 2,000 units were produced despite 20% idle time due to
power failure and actual rate of wages was Rs.1.80 per hour. Calculate Labour Variances.
Standard Costing Problem 2:
From the following data prepare a unit cost statement showing the prime cost of product A and B together
with analysis of variances:
Standard Costing Problem 3:
A gang of workers normally consists of 30 men, 15 women and 10 boys. They are paid at standard hourly rates
as under:

In a normal working week of 40 hours, the gang is expected to produce 2,000 units of output. During the week
ending 31st December, 2002, the gang consisted of 40 men, 10 women and 5 boys. The actual wages paid were
@ Re 0.70, Re 0.65 and Re 0.30 respectively. 4 hours were lost due to abnormal idle time and 1,600 units were
produced.

Calculate:
(i) Wage Variance;

(ii) Wage Rate Variance;

(iii) Labour Efficiency Variance;

(iv) Labour Mix Variance; and

(v) Labour Idle Time Variance.

Standard Costing Problem 4:
Calculate labour variances from the following data:
Gross direct wages Rs.36,000

Standard hours produced 2,000

Standard rate per hour Rs.15

Actual hours paid – 1,800 hours out of which hours not worked (abnormal idle time) are 50 hours.
Standard Costing Problem 5:
From the following particulars calculate variable overhead expenditure variance:

Standard Costing Problem 6:

The standard cost card of a manufacturing concern includes the following particulars:
Variable overhead per unit – 2 hours @ 0-30 p. per hour = 0-60 p.

Actual operating hours 8,000 hours

Actual variable overhead expenses Rs.2,600

Actual units produced 4,850

Calculate necessary cost variances.

Standard Costing Problem 7:
From the following particulars compute:

Problem 1

The standard cost card shows the following details relating to material needed to produce 1kg. of groundnut
oil:
Quantity of groundnut oil required: 3kg
Price of groundnut oil: $2.5/kg

Actual production data:

Production during the month: 1,000 kg
Quantity of material used: 3,500 kg
Price of groundnut oil: $3/kg

Required:
(i). Calculate the material cost variance
(ii). Calculate the material price variance
(iii). Material usage variance
Solution

Standard Quantity (SQ) = 1,000 kg of production x 3kg = 3,000 kg

Standard Price (SP) = $2.5/kg

Actual Quantity = 3,500 kg

Actual Price (AP) = $3/kg

Calculation of Variances

(a) Material Cost Variance = SC – AC

= (SQ x SP) – (AQ x AP)

= (3,000 x 2.50) – (3,500 x 3)

= $3,000 (A)

(b) Material Price Variance = (SP-AP) x AQ

= (2.50 – 3) x 3,500

= $1,750 (A)

(c) Material Usage Variance = (SQ – AQ) x SP

= (3,000 – 3,500) x 2.50 = 1,250 (A)

Problem 2

From the following particulars, compute (a) Material Cost Variances, (b) Material Price Variances
and (c) Material Usage Variance:
Quantity of material purchased = 3,000 units

Value of material purchased = $9,000

Standard quantity of material required per tonne of output = 30 units

Standard rate of material = $2.50 per unit

Opening stock of materials = Nil

Closing stock of material = 500 units

Output during the period = 80 tons

Solution

Actual quantity of material purchased = 3,000 units

Value of material purchased = $9,000

Actual price per unit = $9,000 / 3,000 units = $3

Standard price per unit = $2.50

Standard quantity = 80 tons x 30 units = 2,400 tons

Actual quantity = Opening stock + Purchase – Closing stock = Nil + 3,000 – 500 = 2,500 units

Calculation of variances

(a) Material Cost Variance = (SC – AC)

= (SQ x SP) – (AQ x AP)

= (2,400 x 2.5) – (2,500 x 3) = $1,500 (A)

(b) Material Price variance = (SP – AP) x AQ
= (SP – AP) x AQ

= (2.5 -3) x 2,500 = $1,250 (A)

(c) Material Usage Variance = (SQ – AQ) x SP
= (2,400 – 2,500) x 2.5 = $250 (A)

Problem 3

Calculate various labor cost variances from the following data which are related to the month of january 2019:

Budgeted data Actual data

Production (units) 1,000 1,200

Units produce per hr. 8 6

Rate of wages per hr. $8 $10

Hrs. of unbudgeted holidays – 15

Idle time (hrs.) 5 8

Solution

(i) Labor Rate Variance

= (SR – AR) – AH

= (8 – 10) x 223

= $446 (A)

(ii) Labor Time or Efficiency Variance

= (Standard hours of production – Actual hrs for production) x Standard Rate of Wages

= (5 – 8) x 8

= $24 (A)

(iv) Labor calendar variance

= (Unbudgeted holidays hrs. x standard rate of wages)

= 15 x 8

= $120 (A)

Total Labor Cost Variance = $1,190 (A)

Verification:
Labor Cost Variance

= (SH x SR) – (AH x AR)

= (130 x 8) – (223 x 10)

= $1,990 (A)
Notes:
1. Standard hrs. is calculated as under:
= (Budget units / Budgeted unit per hr.) + Budgeted idle time

= (1000 / 8) + 5 = 125 + 5 = 130 hrs.

2. Actual hours are calculated as follows:

(Actual units produced / Actual units per hour) + Actual idle time + unbudgeted holidays per hour

= (1,200 / 6) + 8 + 15 = 200 + 8 + 5 = 223 hours

3. Standard hours for production are calculated as follows:

Standard units / Standard units per hour

= 1,000 / 8 = 125 hours

4. Actual hours for actual production are calculated as follows:

Actual units produced / Actual units per hour

= 1,200 / 6 = 200 hours

P&G company produces many products for household use. Company sells products to storekeepers as well as to
customers. Detergent-DX is one of the products of P&G. It is a cleaning product that is produced, packed in large
boxes and then sold to customers and storekeepers.

P&G uses a traditional standard costing system to control costs and has established the following materials, labor
and overhead standards to produce one box of Detergent-DX:

 Direct materials; 1.5 pounds @ $12 per pound: $18.00

 Direct labor; 0.6 hours $24 per hour: $14.40
 Variable manufacturing overhead; 0.6 hours @ $5.00: $3.00

During August 2012, company produced and sold 3,000 boxes of Detergent-DX. 8,000 pounds of direct materials
were purchased @ $11.50 per pound. Out of these 8,000 pounds, 6,000 pounds were used during August. There
was no inventory at the beginning of August. 1600 direct labor hours were recorded during the month at a cost of
$40,000. The variable manufacturing overhead costs during August totaled $7,200.

Required:

1. Compute materials price variance and materials quantity variance. (Assume that the materials price
variance is computed at the time of purchase.)
2. Compute direct labor rate variance and direct labor efficiency variance.
3. Compute variable overhead spending variance and variable overhead efficiency variance.

Solution:

(1). Materials variances:

a. Materials price variance:

b. Materials quantity variance:

*3,000 boxes × 1.5 pounds per box = 4,500 pounds

F = Favorable; U = Unfavorable

(2). Labor variances:

a. Direct labor rate variance:

b. Direct labor efficiency variance:

*3,000 boxes × 0.6 hours per box = 1,800 hours

F = Favorable; U = Unfavorable

(3) Variable overhead variances:

a. Variable overhead spending variance:

b. Variable overhead efficiency variance:

*3,000 boxes × 0.6 hours per box = 1,800 hours

F = Favorable