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Standard Costing

Ariel company produces many products for household use. Company sells products to
storekeepers as well as to customers. Tide with downey scent is one of the products of Arial. It
is a cleaning product that is produced, packed in large boxes and then sold to customers and
storekeepers. (By PAGUNSAN)

Ariel uses a traditional standard costing system to control costs and has established the following
materials, labor and overhead standards to produce one box of Tide with downey scent.

 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 Tide with downey scent. 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.

Compute for the Following:

Compute variable overhead spending variance and variable overhead efficiency


variance.

Solution:

a. Variable overhead spending variance

Actual hours worked at actual rate ₱7, 200


Actual hours worked at standard
rate( 1,600 hours x ₱5) ₱8,000
Variable overhead spending variance ₱ 800 Favorable

b. Variable overhead efficiency variance

Actual hours worked at standard rate


(1,600 hours x ₱5) ₱ 8,000
Standard hours allowed at standard rate
(1,800 hours x ₱5) ₱ 9,000
Variable overhead efficiency variance ₱ 1,000 Favorable
Which of the following is a correct formula for computing direct materials price variance?
(By PAGUNSAN)

A. Standard quantity purchased × (Actual rate - Standard rate)


B. Actual quantity purchased × (Actual rate - Standard rate)
C. Standard quantity purchased × (Actual rate + Standard rate)
D. Actual quantity purchased × (Actual rate + Standard rate)

Answer: B

Reference:
https://www.accountingformanagement.org/problem-1-scava/

Arcya Glass Corporation manufactures a glass bottle. The company need workers for Assembly,
Maintenance, and Inspection. It requires raw materials such as sand, soda ash, and limestone as
well as Assembly Labor, Maintenance Labor, and Inspection Labor to produce one glass bottle.
Arcya Glass Incorporation manufactured 150 glass bottles during the current month. The
following data needed is presented below:

ACTUAL STANDARD
SAND: 6,000 pounds purchased and SAND: 600 pounds @ $5.00 per pound
used @ $4.75 per pound

SODA ASH: 3,750 pounds purchased SODA ASH: 350 pounds @ $3.00 per
and used @ $3.10 per pound pound

LIMESTONE: 8,500 pounds purchased LIMESTONE: 400 pounds @ $2.50 per


and used @ $2.75 per pound pound

Assembly labor hours: 1,480 @ $16.20 Assembly Labor: 6 hours @ $18 per
per hour hour

Maintenance labor hours: 1,055 @ Maintenance Labor: 2 hours @ $ 11


$11.60 per hour per hour

Inspection Labor: 500 hours @ $ 10 Inspection Labor: 2 hours @ $ 10 per


per hour hour
What is the total material yield variance and total labor mix variance?
(By YAP)

A. 7,481.5 F and 4,311 U

B. 7,481.5 F and 4,311 F

C. 7,481.5 U and 4,311 U

D. 7,481.5 U and 4,311 F

Answer B.

Solution:

SM x AQ x SP SM x SQ x SP
18,250 x (60/135) x 5.00 = 40,555.55 9,000 x 5.00 = 45,000
18,250 x (60/135) x 3.00 = 14,194.44 5,250 x 3.00 = 15,750
18,250 x (60/135) x 2.50 = 13,518.51 6,000 x 2.50 = 15,000
68,268.50 75,750
7,481.50 F
Material Yield Variance

AM x AH x SR SM x AH x SR
1,480 x 16.20 = 23,976 1,821 x 18 = 32,778
1,055 x 11.60 = 12,238 607 x 11 = 6,677
500 x 10.00 = 5,000 607 x 10 = 6,070
41,214 45,525
4,311 F
Labor Mix Variance
Relevant Information for Decision Making

Christ Philip Stein Rolex manufactures high-end smartwatch. The company manufactures
75,000 smartwatch a year at a variable cost of 215,550,000 php and a fixed cost of
117,050,000 php. Based on Christopher's estimate and previous records, 67,000 smartwatch
will be sold at the regular price of 450,000 php each. In addition, a special order was placed for
8,000 smartwatch to be sold at 35% dicount off based on the regular price. The unit relevant
cost per unit for Christopher's decision is? (By SOTTO)

a. 2784 php
b. 2874 php
c. 7284 php
d. 4728 php

Solution:

215,550,000 / 75,000 = B. 2874 the relevant cost will be the variable cost per unit
of smartwatch.

David France sells phone for the future of his wife Christoph for $ 664 per unit, and
the standard cost card for the product shows the following costs:

Direct material $ 129

Direct labor. $ 202

Overhead (80% fixed) $ 111

Total. $ 442

David France received a special order for 1,000 units of the product. The only
additional cost to Robertson would be foreign import taxes of $ 29 per unit. If Robertson is able
to sell all of the current production domestically, what would be the minimum sales price that
Robertson would consider for this special order? (By SOTTO)

a. $ 665.00
b. $ 765.00
c. $ 693.00
d. $ 998.00

Solution:
664 + 29 = C. 693.00 the company would increase its minimum sales price to reflect
the foreign import tax of $1 per unit.