Problem 1

The standard cost card shows the following details relating to the materials needed to produce 1 kg of
groundnut oil:
 Quantity of groundnut oil required: 3 kg
 Price of groundnut oil: $2.5/kg
Actual production data are given as follows:
 Production during the month: 1,000 kg
 Quantity of material used: 3,500 kg
 Price of groundnut oil: $3/kg
Required:
 Calculate the material cost variance
 Calculate the material price variance
 Material usage variance
Solution
First, note the following:
 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
Now, the variances can be calculated as follows:
(1) Material Cost Variance = SC - AC
= (SQ x SP) - (AQ x AP)
= (3,000 x 2.50) - (3,500 x 3)
= $3,000 (A)
(2) Material Price Variance = (SP-AP) x AQ
= (2.50 - 3) x 3,500
= $1,750 (A)
(3) Material Usage Variance = (SQ - AQ) x SP
= (3,000 - 3,500) x 2.50 = 1,250 (A)
Problem 2
Using the information provided, calculate:
 Material cost variance
 Material price variance
 Material usage variance
A summary of the information needed to complete this task is given as follows:
 Quantity of material purchased = 3,000 units
 Value of material purchased = $9,000
 Standard quantity of material required per tonn 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
As an initial step, note the following:
 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
Now, the variances can be calculated as follows:
(1) Material Cost Variance = (SC - AC)
= (SQ x SP) - (AQ x AP)
= (2,400 x 2.5) - (2,500 x 3) = $1,500 (A)
(2) Material Price variance = (SP - AP) x AQ
= (SP - AP) x AQ
= (2.5 -3) x 2,500 = $1,250 (A)
(3) Material Usage Variance = (SQ - AQ) x SP
= (2,400 - 2,500) x 2.5 = $250 (A)
Problem 3
Calculate different labor cost variances from the following data, which cover the month of January
2019.
Budgeted Data Actual Data
Production (units) 1,000 1,200
Units Produced (per hr.) 8 6
Rate of Wages (per hr.) $8 $10
Hrs. of Unbudgeted Holidays - 15
Idle Time (hrs.) 5 8
Solution
(1) Labor rate variance
= (SR - AR) - AH
= (8 - 10) x 223
= $446 (A)
(2) Labor time (or efficiency variance)
= (Standard hours of production - Actual hours of production) x Standard rate of wages
= (5 - 8) x 8
= $24 (A)
(3) Labor calendar variance
= (Unbudgeted holiday hours 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 hours is calculated as follows:
= (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

Standard Costing and Variance Analysis Problems & Solution:Problem 1:Materials Variance
Analysis:
The Schlosser Lawn Furniture Company uses 12 meters of aluminum pipe at $0.80 per meter asstandard for
the production of its Type A lawn chair. During one month's operations,100,000 meters of the pipe were
purchased at $0.78 a meter, and 7,200 chairs wereproduced using 87,300 meters of pipe. The materials
price variance is recognized whenmaterials are purchased.
Required:
Materials price and quantity variances.
Solution:
Meters of pipe Unit Cost Amount
Actual quantity purchased 100,000 $0.78 actual $78,000
actual quantity purchased 100,000 $0.80standard $80,000
Materials purchase price variance 100,000 $(0.02)$ (2,000) fav.
 Actual quantity used 87,300 0.80 standard $69,840 Standard quantity allowed
86,400 0.80 standard $69120
Materials quantity variance 900 0.80 $720 Unfav =====================

Intacc
1. An entity sells goods for ₱150,000 to a customer who was granted a special credit period of 1 year. The
entity normally sells the goods for ₱120,000 with a credit period of one month or with a ₱10,000 discount
for outright payment in cash. How much is the initial measurement of the receivable if the entity does not
use the practical expedient allowed under PFRS 15?
a. 150,000
b. 130,000
c. 120,000
d. 110,000
Use the following information for the next two questions:
On January 1, 20x1, ABC Co. sold a transportation equipment with a historical cost of
₱1,000,000 and
accumulated depreciation of ₱300,000 in exchange for cash of ₱100,000 and a noninterest-
bearing note
receivable of ₱800,000 due on January 1, 20x4. The prevailing rate of interest for this type of note is
12%.
2. How much is the interest income in 20x1?
a. 68,331
b. 76,532
c. 85,714
d. 96,000
3. How much is the carrying amount of the receivable on December 31, 20x2?
a. 800,000
b. 569,424
c. 637,755
d. 714,286
Use the following information for the next three questions:
On January 1, 20x1, Mojo Co. sold transportation equipment with a historical cost of
₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱500,000 and
a noninterest-bearing note receivable of ₱8,000,000 due in 4 equal annual installments starting on
December 31, 20x1 and every December 31 thereafter. The prevailing rate of interest for this type of
note is 12%.
4. How much is the interest income in 20x1?
a. 728,946
b. 678,334
c. 728,964
d. 704,236
5. How much is the current portion of the receivable on December 31, 20x1?
a. 1,271,036
b. 1,423,560
c. 3,380,102
d. 1,594,388
6. How much is the carrying amount of the receivable on December 31, 20x2?
a. 4,803,663
b. 3,380,103
c. 6,074,699
d. 6,000,000

Use the following information for the next three questions:

On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of
₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱100,000 and
a noninterest-bearing note receivable of ₱4,000,000 due in 4 equal annual installments starting on
January 1, 20x1 and every January 1 thereafter. The prevailing rate of interest for this type of note is
12%.
7. How much is the interest income in 20x1?
a. 408,230
b. 278,334
c. 328,964
d. 288,220
8. How much is the carrying amount of the receivable on December 31, 20x1?
a. 1,690,510
b. 892,857
c. 2,690,051
d. 1,594,388
9. How much is the carrying amount of the receivable on January 1, 20x3?
a. 892,857
b. 3,380,102
c. 6,074,699
d. 6,000,000
Use the following information for the next two questions:
On January 1, 20x1, ABC Co. sold machinery with historical cost of ₱3,000,000 and accumulated
depreciation of ₱900,000 in exchange for a 3-year, ₱2,100,000 noninterest-bearing note receivable
due in equal semi-annual payments every July 1 and December 31 starting on July 1, 20x1. The
prevailing rate of interest for this type of note is 10%.
10. How much is the interest income in 20x1?
a. 88,825
b. 177,649
c. 128,964
d. 164,591
11. How much is the carrying amount of the receivable on December 31, 20x1?
a. 1,241,083
b. 982,378
c. 1,690,051
d. 1,594,388
12. On January 1, 20x1, ABC Co. sold machinery costing 竄ｱ 3,000,000 with accumulated depreciation
of
竄ｱ 1,100,000 in exchange for a 3-year, 竄ｱ 900,000 noninterest-bearing note receivable due as
follows:
Date Amount of installment
December 31, 20x1 400,000
December 31, 20x2 300,000
December 31, 20x3 200,000
Total 900,000

The prevailing rate of interest for this type of note is 10%. How much is the carrying amount of the
receivable
on December 31, 20x1?
a. 467,354
b. 438,016
c. 376,345
d. 428,346

Use the following information for the next two questions:

On January 1, 20x1, ABC Co. sold inventory costing ₱1,800,000 with a list price of ₱2,200,000 and a
cash price of ₱2,000,000 in exchange for a ₱2,400,000 noninterest-bearing note due on December 31,
20x3.
13. How much is the initial measurement of the receivable?
a. 1,800,000
b. 2,200,000
c. 2,000,000
d. 2,400,000
14. How much is the carrying amount of the receivable on December 31, 20x1?
a. 2,125,390
b. 2,135,341
c. 2,098,343
d. 2,000,000