PRACTICE SHEET

STANDARD COSTING AND OVERHEAD ANALYSIS

Q1. Fastic Corporation makes a product with the following standard costs:

   
The company reported the following results concerning this product in August.

   
The materials price variance is recognized when materials are purchased. Variable
overhead is applied on the basis of direct labor-hours.

a. Compute the materials quantity variance.

b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the direct labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance. 

Q2. Dodge Company produces a single product. The company has set the following
standards for materials and labour:

   

During the past month, the company purchased 7,000 kilograms of direct materials at a
cost of $26,250. All of this material was used in the production of 1,300 units of product.
Direct labour cost totalled $55,125 for the month. The following variances have been
computed:

   

Required:

a) For direct materials, compute the standard price per kilogram, the standard quantity
allowed for materials in total for the month's production, and the standard quantity per
unit of product.

b) For direct labour, compute the actual direct labour cost per hour for the month and
the labour rate variance.
Show Your Working!

Q3. Mauve Company uses a standard cost system that applies manufacturing overhead to
units of product on the basis of direct labour hours (DLHs). The following data pertain to
last month:

Actual Hours Worked 2,400 DLHs

Budgeted Fixed Overhead Costs $10,000

Actual Fixed Overhead Costs $10,400

Standard Hours Allowed 2,500 DLHs

Predetermined Overhead Rate $5 per DLH

Calculate Fixed Overhead Budget variance and Fixed Overhead Volume variance.

Q4. Lido Company's standard and actual costs per unit for the most recent period, during
which 400 units were actually produced, are given below:

Standard Actual

Materials:    

Standard: 2 metres at $1.50 per m. $3.00  

Actual: 2.1 metres at $1.60 per m.   $3.36

 Direct labour:    

Standard: 1.5 hrs. at $6.00 per hr. 9.00  

Actual: 1.4 hrs. at $6.50 per hr.   9.10

Variable overhead:    

Standard: 1.5 hrs. at $3.40 per hr. 5.10  

Actual: 1.4 hrs. at $3.10 per hr. _____ 4.34

Total unit cost $17.19 $16.80

There were no inventory of materials at the beginning or end of the period.

Required:

From the above information, compute the following variances. Show whether the variance
is favourable (F) or unfavourable (U):

a) Materials price variance

b) Materials quantity variance
c) Direct labour rate variance
d) Direct labour efficiency variance
e) Variable overhead spending variance
f) Variable overhead efficiency variance