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Standard Costing Sample Problems

The document describes two problems involving standard costing. Problem A provides the standard costs and actual results for a plant that produces motorcycle subassemblies. It lists variances to calculate for materials, labor, and overhead. Problem B similarly provides standard and actual costs for a company that produces a potion, also including variances to calculate.

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salvadortobito
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1K views

Standard Costing Sample Problems

The document describes two problems involving standard costing. Problem A provides the standard costs and actual results for a plant that produces motorcycle subassemblies. It lists variances to calculate for materials, labor, and overhead. Problem B similarly provides standard and actual costs for a company that produces a potion, also including variances to calculate.

Uploaded by

salvadortobito
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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STANDARD COSTING

Sample Problems

PROBLEM A:

The GR plant of Johnny Blaze Corporations Motor Division produces a major subassembly of
motor that are specific for 300cc motorbikes. The plant uses the standard costing system for
production costing and control. The standard cost sheet for the subassembly are as follows:

Direct Materials (7 lbs. @ P6.00) 42.00


Direct Labor (2 hrs. @ P12.00) 24.00
Variable Overhead (2 hrs. @ P10.00) 20.00
Fixed Overhead (2 hrs. @ P6.00) 12.00
Total Standard Cost per Unit 98.00

During the year, the GR plant produced a total pf 70,000 units. 465,000 pounds of materials were
purchased at P5.80 per pound. There were 26,400 pounds of materials in the beginning
inventory, which is carried at P6 per pound. There was no ending inventory. The company used
150,000 direct labors at a total cost of P1,950,000. Actual fixed overhead totaled P913,000 and
actual variable overhead totaled P1,470,000.

The GR plants practical activity is 75,000 units per year. Standard overhead rates are computed
based on practical activity measured in standard direct labor hours.

Requirements:

Solve for Johnny Blaze Corporations:


a. Materials Price Variance. P93,000 Favorable
b. Materials Usage Variance. P8,400 Unfavorable
c. Labor Rate Variance. P150,000 Unfavorable
d. Labor Efficiency Variance. P120,000 Unfavorable
e. Variable Overhead Spending Variance. P30,000 Favorable
f. Variable Overhead Efficiency Variance. P100,000 Unfavorable
g. Fixed Overhead Spending Variance. P13,000 Unfavorable
h. Fixed Overhead Volume Variance. P60,000 Unfavorable
PROBLEM B:

Beginning the year 2017, Harry Company operated to manufacture one particular chemical
product, the Felix Felicis. The process of making the Felix Felicis is a long and tedious process, so
Harry decided to adapt the standard costing system. Its standard cost sheet presented the
following information with regard to the creation of one unit of the said potion:

Direct Materials (6 lbs. @ P6.40) 38.40


Direct Labor (1.8 hrs. @ P18.00 32.40
Fixed Overhead (1.8 hrs. @ P8.00) 14.40
Variable Overhead (1.8 hrs. @ P1.50) 2.70
Total Standard Cost per Unit 87.90

In addition, Harry noted that it computes overhead rates using the operations practical volume,
which is at 288,000 units.

The following are the actual results of operations during the year:

Units produced 280,000


Materials purchased 1,684,700 lbs. @ P6.60
Materials used 1,684,000
Direct labor 515,000 hrs. @ P18.10
Fixed overhead 4,140,200
Variable overhead 872,000

Requirements:

Solve for Harry Companys:


a. Materials Price Variance. P336,940 Unfavorable
b. Materials Quantity Variance. P25,600 Unfavorable
c. Labor Rate Variance. P51,500 Unfavorable
d. Labor Efficiency Variance. P198,000 Unfavorable
e. Variable Overhead Spending Variance. P99,500 Unfavorable
f. Variable Overhead Efficiency Variance. P16,500 Unfavorable
g. Fixed Overhead Spending Variance. P7,000 Favorable
h. Fixed Overhead Volume Variance. P115,200 Unfavorable

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