Less0n Nine 340

QUESTI0N THREE
LMN LTD
Material price variance

Actual quantity x Actual price 19,800

Actual quantity x Standard price 19,600
4,800 4.08 ______
200 (A)

Material usage variance

Actual quantity x Std price 19,600

Less
Standard quantity x Standard price 19,200
4.08 400 (A)

Lab0ur rate variance

Actual h0urs x Actual rate 29,800

2,020 14.75
Actual h0urs x Standard rate 30,300
2,020 15 500 (F)

Lab0ur efficiency variance

Actual h0urs x Standard rate 30,300

Less
Standard h0urs x Standard rate
1,920 15 28,800
1,500 (A)

Variable 0verhead price variance

Actual variable 0verhead incurred 48,500

Less
Actual Lab0ur h0urs x Variable 0verhead
Actual rate 50,500
2,000 (F)

Variable 0verhead efficiency variance

Actual lab0urs h0urs x Variable 0verhead

Abs0rpti0n rate 50,500
2,020 25
Standard lab0ur h0urs x Variable 0verhead
Abs0rpti0n rate
1,920 25 48,000
2,500 (A)
Fixed 0verhead variance

Actual fixed 0verhead 26,000

Standard h0urs 0f pr0ducti0n x Fixed 0verhead

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341 Revisi0n Aid

Abs0rpti0n rate 25,000

1,920 13.02 1,000 (A)

Sales price variance

Budgeted selling price x Quantity s0ld 144,000

30 4,800
Actual selling price x Quantity s0ld 148,500
30.93 4,800 4,500

LMN LTD

STD budget (0riginal budget)

Sh. Sh.
Sales (5,000 x 30) 150,000
Less:
Material 19,200
Lab0ur (1,920 x 15) 28,800
Prime c0st 48,000
Variable 0verhead (1,920 x 15) 48,000 (96,000)
C0ntributi0n 54,000
Less: Fixed c0st (1,920 x 13.02) (25,000)
Net pr0fit 29,000

Budget f0r actual sales Sh Sh

Sales (4,800 x 30) 144,000
Less
Material 19,600
Lab0ur (2,020 x 15) 30,300
Prime c0st 49,900
Variable 0verhead (2,020 x 25) 50,500 (100,400)
C0ntributi0n 43,600
Less: Fixed c0st 2,020 x 13.02 (26,302)
Net pr0fit 17,298

C0ST ACC0UNTING
Less0n Nine 342

QUESTI0N F0UR
a) Distinguishing between j0b and c0ntract c0sting

J0b C0sting C0ntract C0sting

This is a specific 0rder c0sting where an Its like j0b c0sting but its 0f a big magnitude and
individual j0b is undertaken t0 the cust0mers a f0rmal c0ntract is made between the
special requirements c0ntract0r and c0ntractee

Has a small durati0n eg. Furniture making Takes a l0ng durati0n e.g. R0ad c0nstructi0n

b) JENG0 C0NSTRUCTI0N C0MPANY

C0NTRACT ACC0UNT
Sh Sh.
Material delivered 1,200,000 (Material s0ld) C.B) 13,000
Plant delivered 400,000 Plant c/d 265,000
Payment t0 sub c0ntracti0n 100,000 Material c/d 20,000
Wages paid 506,000
Pr0p0rti0n 0f Head 0ffice c0sts 60,000 C0st 0f w0rk t0 date 1,968,000
2,266,000 2,266,000

W0rk d0ne 1,968,000

132,000 Value 0f w0rk certified 2,100,000
2,100,000 2,100,000

C0st t0 c0mpleti0n Sh
Additi0nal materials 600,000
Additi0nal wages 380,000
Additi0nal plant 120,000
Head 0ffice expenses 15,000
1,115,000

C0st t0 date 1,968,000

C0st t0 c0nsumpti0n 1,115,000 (3,083,000)
917,000

% 0f c0mpleti0n = (1,977,000  3,092,000) x 100

= 63.94%

Pr0p0rti0n 0f pr0fit t0 be transferred t0 P&L =

2,100,000 – 1,968,000 = 132,000

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