Ex (1): An industrial company produces a product (A) and uses a standard costing system.

The standard
cost card shows that: Direct materials 4 kilograms at a standard price of $3 per kilogram. The actual
production produced for the period is 10,000 units, with the cost of direct materials used was $164,000,
as Direct materials used 41,000 kilos, while the direct materials purchased 45,000 kilos.
required:
1– figure out the overall (total) cost variance of DM.
2– prepare the performance report of direct materials cost using the 2-ways analysis (comment on
results).
3– account for variances.
4 – apply the 3-ways analysis.

Ex (2): Company (X) for furniture applies a standard costing system to control DM. cost. Presented below
is the performance report of direct materials cost:

Required: compute the missing numbers.

Ex (3): ALEX INC. manufactures a single product (XYZ)” that requires THREE types of direct materials
that are (A), (B), and (C); it applies the standard costing system on DM cost. Presented below is the
related data.
Ex (4): JANA INC. manufactures a single product (CANNED BEEF) named as “MEATY” that requires two
types of direct materials that are MEAT (X1) and FLAVORS (X2 ); it applies the standard costing system on
DM cost. Presented below is the related data:
Actual data:
1– Number of actual units produced (actual production) is 2000 cans.
2– Total quantity purchased is 4000 KGs from (X1 ) at cost of $ 24000 and 10000 KGs from (X2 ) at cost of
$ 40000.
3– The quantity used is 3000 KGs from X1 , and 9000 KGs from X2 .
Standard data:
1- Number of budgeted units (budgeted production) is 2500 cans.
2– Standard quantity of budgeted units is 7500 KGs from (X1 ), and 15000 KGs from (X2 ).
3- The price per kg. is $ 4 for (X1), and $2 for (X2 ).
required: 1– Figure– out total variance of DM. 2– Apply the maximum level of variance analysis

EX (5): Consider the following data collected for Great Homes, Inc.:
required: 1– Figure – out total variance of DL. And DM.
2– Apply 2 ways analysis for DL. And DM. cost (by using the performance report method only).

EX (6): Gloria Dee, Inc., designs and manufactures T-shirts. It sells its T-shirts to brand-name clothes
retailers in lots of one dozens. Gloria Dee’s May 2023 standard costs and actual results for direct inputs
are as follows: STANDARD DATA:

required: 1– Figure – out total variance of DL and DM.

2– Apply 2 ways analysis for DM. and DL. (assume that the joint v. is impounded in quantity/ hours v.).
3- Apply 3 ways analysis for DM. and DL

EX (7): Assume that the related variances to DL. cost was:

ACTUAL DL. COST $34500. STANDARD DL. COST $34800. MIX V. 3500 U. HOURS OR (EFFICIENCY) V.
(NET) 4950 U. RATE V. (NET) 3600 F. Balances at the end were Inventory $12000, Work in process $10000,
finished goods $15000, and cost of goods sold $25000.
required: Prepare the closing entries of variances.

Ex (8):
The French Bread Company bakes baguettes for distribution to upscale grocery stores. The company
has two direct-cost categories: direct materials and direct manufacturing labor. Variable manufacturing
overhead is allocated to products based on direct labor-hours. Following is some budget data for the
French.
Bread Company:
- Direct labor uses 0.02 hours per baguette.
- machine use 0.03 hours per baguette.
- Variable manufacturing overhead $10.00 per direct labor-hour.
The French Bread Company provides the following additional data for the year ended December 31,
2023:
- Planned (budgeted) output 3,200,000 baguettes.
- Actual production 2,800,000 baguettes.
- Direct labor 50,400 hours.
- Machines hours 50,600.
- Actual variable manufacturing overhead $680,400.
Required:
1– the total v. of variable MOH.
2- Apply the two ways analysis on variable MOH.
3- Apply the three ways analysis on variable MOH

EX (9): State Which one is true or false:

1- Price variance (quantity purchased) is allocated to inventory, work in process, finished goods, and
cost of goods sold. while price variance (quantity used) is allocated to work in process, finished
goods, and cost of goods sold.
2- 2- Price variance (quantity used) is allocated to inventory, work in process, finished goods, and cost
of goods sold. while price variance (quantity purchased) is allocated to work in process, finished
goods, and cost of goods sold.

Ex (10):
Company (X) for furniture applies a standard costing system to control DM. cost. Presented below is the
related information to DM. cost.
The actual quantity purchased is 15000 kg.
The actual quantity used is 12000 Kg.
Total direct material cost variance is 15000 U.
Price variance (gross) is 24000 U.
Standard price is $3 per Kg.
Required: 1 – Determine the actual price of direct material.
2 – Calculate the quantity variance.
3- Calculate the standard quantity allowed for actual production.
4 –Account for variances. (balances at the end were: inv $6000, WIP $6000, FINISHED GOODS $6000,
and C.O.G.S $6000).

Ex (11):
Presented below is the budget related cost data to “MMM” INC.
Percentage of full capacity %20 %40 %60
Units 4000 8000 12000
DL hours 12000 24000 36000
Machine hours 24000 48000 ?
prime cost 60000 ? ?
variable MOH ? ? 36000
considering that:
1 – DL cost represents %80 of prime cost.
2 – variable MOH is applied based on machine hours.
Actual data
1 – units produced are 18000.
2 – DL hours are 60000 while machine hours are 100000.
3 - DL cost is $240000 while variable MOH is $60000.
Required
1 – apply the maximum level of variance analysis on DL, and VMOH.
2 – the production manager, demy mike, said:
“Science both efficiency variance of DL and efficiency variance of V MOH measure performance’s
efficiency, no need to compute both of them (one of them is enough)”. Do you agree?

Ex (12):
Assume that the related variances to DL. cost was:
Actual DL. Cost $34500.
Standard DL. COST $34800.
Mix V. 3500 U.
Hours (OR Efficiency) V. (Net) 4950 U.
Rate V. (Net) 3600 F.
Balances at the end were Inventory $12000, Work in process $10000,
finished goods $15000, and cost of goods sold $25000.
Required: Prepare the journal entries for DL. Cost.

Ex (13):
Assume that the related variances to DM. cost were:
Price variance (quantity purchased) 30000 F.
Difference between price variances purchased and used 7500 F.
Total DM. Variance 5250 F.
Balances at the end were Inventory $12000, Work in process $10000,
finished goods $15000, and cost of goods sold $25000.
Required:
1- Calculate the quantity variance (net)
2- Calculate the price variance (gross).
3- Prepare the closing entry.

EX
presented below is the related income statement to LARA INC. under absorption approach for the
year ended on DEC. 31st 2023.
Sales revenue 350,000
(-) c.o.g.s. (280,000)
Gross profit 70,000
(-) selling expenses (variable) (14000)
(-)selling and administrative (fixed) (16000)
(-)unused F.M.O.H ( 20000-16000)5 (20000)
Net income 20000
Considering that:
1 – DM is $8/unit, DL is $4/unit, and V.M.O.H is $3/unit.
2 - %50 of full capacity was used in 2022, while %80 is used in 2023.
3 –cost of ending inventory 2023 (full costing) is 127500, while selling (variable) is $1/unit.

Accordingly
1 – cost of beginning inventory under full costing is:
A –85000. b –100,000 c – 60,000 d – 32000.

Cost/unit in 2022 = 8+4+3+ ( 100000÷10000) = 25.

Total fixed cost is 20000 (full capacity)× 5 (used FMOH/unit)= 100000
Units produced in 2023= 16000 that represents %80 of full capacity. So,
Units produced 2022 = 16000 ×(50/80) = 10000.
Cost/unit in 2023 = 8+4+3+ (100000÷16000) = 21.25
Units of ending = ( 127500÷21.25)= 6000
Units sold = 14000÷1= 14000
Units of beginning = 14000+6000-16000= 4000
Cost of beginning inv.= 4000× 25= 100,000
B is correct

2 – cost of ending inv. Under absorption is

A –127500. b –90,000 c – 120,000 d – 150,000.
= 6000× (15+ (100000÷20000)) = 20
Cost of ending inv. = 6000×20= 120,000
C is correct.
3 – net income under full costing approach is
A –37500. b –25,000 c – 20,000 d – 7500.

Unused FMOH/unit is
Current = (100000÷16000) = 6.25 – 5 (used) = 1.25
Previous = (100000÷10000)= 10 – 5=5
Net income under full costing 7500
(+) unused FMOH of beginning 20000 (4000×5)
(-) unused FMOH of ending (7500) (6000×1.25)
Net income under absorption 20000
D is correct

4 – net income under variable costing is

A –10000. b –20,000 c – 7500 d – 25000.

Net income under absorption 20000

(+) used FMOH of beginning 20000 (4000 × 5)
(-) used FMOH of ending (30000) (6000× 5)
net income under variable costing 10000
A is correct

5 – net income under super variable costing is

A –(38000). b – (4,000 ) c – 7500 d – 32000.
Net income variable costing 10000
(+) DL, and VMOH of beginning 28000 (4000× 7)
(-) DL, and VMOH of ending (42000) (6000× 7)
net income under super variable costing (4000)
B is correct

6 – C.O.G.S. under full costing is

A –10000. b –312500 c – 37500 d – 25000

= cost of beginning 100,000

(+) cost of production 340000 (16000×21.25)
(-) cost of ending (127500) (6000×21.25)
312500
B is correct

7 – if units produced in 2024 were 18000, net income under full costing is
A –10000. b –7000 c – 6000 d – 5500
Under full costing net income is positively related to units produced, so A is correct
The reason is: when units produced increase, FMOH/ UNIT decreases. Accordingly net income
increases. While under absorption, variable, and super variable net income is positively related
with units sold.
A is correct

8 – contribution margin under super variable costing is

A –10000. b –312500 c – 238000 d – 25000
= 350000 – (14000×8) = 238000. c is correct

IMPORTANT NOTES:

Note 1:
1– efficiency variance “gross” = efficiency variance “net” + joint variance.
2– rate variance gross = rate variance “net” + joint variance.
3– total variance = efficiency variance “net” + rate variance “net” + joint variance.

Note 2:
Prime cost = DL + DM
Conversion cost = DL + MOH

Note 3:
In MOH problems suppose that he gives you that DM = x % of prime cost, In this case the problem will be changed
from DL to DM and instead of hours it will be Quantity.

Note 4:
Suppose he gave you that MOH represents 60% of conversion cost, therefore DL represents 40% of conversion
cost, if he gave you that the fixed cost is 20,000.
Then simply VOH = MOH – Fixed cost

Note 5:
1– when AQ = SQ (quantity variance= zero), total variance equals price variance (net or gross depending on the
method you apply).
2– when AP= SP (price variance = zero), total variance equals quantity variance (net or gross depending on the
method you apply).

Note 6:
1- Total DM COST variance= price v. (net) + quantity v. (net) + joint v.

2– Joint variance is referred to as DR or CR, NOT F, OR U.

The reason behind is: It is a mix of two variances that may differ in nature. For example, the result of a negative PV,
and a positive QV is mathematically negative. However, it is not totally favorable (one of the variances is
unfavorable). It is considered as a shared responsibility variance between purchases and production departments.

3-when AQ =SQ (quantity variance (net) = zero), total variance equals total of price variance (net) and joint
variance.
4- when AP =SP (price variance (net) = zero), total variance equals total of quantity variance (net) and joint variance
Note 7:
• Sometimes you will be forced to use the performance analysis method.
• When the question requires the Maximum level, i.e. it will either be 4-ways or 3-ways.
• Don’t forget to write the conditions in a 4-way analysis