Practice Questions • 20 Questions
State what is meant by "exception reporting" in the context of a standard costing system. (2 marks)
Explain the difference between an ideal standard and an attainable standard in a standard costing system. (3 marks)
State and explain TWO possible causes of an adverse material usage variance. (4 marks)
State and explain TWO possible causes of a favourable labour rate variance. (4 marks)
Kelmoor Ltd reported a favourable material price variance and an adverse material usage variance for the month of April. Explain how these two variances may be interrelated. (4 marks)
Explain TWO reasons why the management of a business using a standard costing system should investigate adverse variances. (4 marks)
Explain TWO actions that the management of Ashton Sportswear Ltd could take in response to a persistent adverse labour efficiency variance. (4 marks)
The following information is provided for Caldwell Furniture Ltd for October. (a) Calculate the standard material quantity for the actual level of production. (1 mark) (b) Calculate the total direct material variance. (2 marks) (c) Calculate the direct material price variance. (1 mark) (d) Calculate the direct material usage variance. (2 marks)
The following labour data is provided for Caldwell Furniture Ltd for October. (a) Calculate the standard labour hours for the actual level of production. (1 mark) (b) Calculate the total direct labour variance. (2 marks) (c) Calculate the direct labour rate variance. (1 mark) (d) Calculate the direct labour efficiency variance. (2 marks)
Caldwell Furniture Ltd budgeted to sell 400 units at £180 per unit in October. Actual sales were 350 units at £195 per unit. (a) Calculate the total sales variance. (2 marks) (b) Calculate the sales price variance. (2 marks) (c) Calculate the sales volume variance. (2 marks)
Thornbury Metals Ltd manufactures industrial components. The following data is provided for September. Actual output is the same as budgeted output. (a) Calculate the total direct material variance. (2 marks) (b) Calculate the direct material price variance. (2 marks) (c) Calculate the direct material usage variance. (2 marks) (d) Prepare a materials cost reconciliation statement. (2 marks)
The following labour data is provided for Thornbury Metals Ltd for September. Actual output is the same as budgeted output. (a) Calculate the total direct labour variance. (2 marks) (b) Calculate the direct labour rate variance. (2 marks) (c) Calculate the direct labour efficiency variance. (2 marks) (d) Prepare a labour cost reconciliation statement. (2 marks)
Nexford Textiles Ltd manufactures shirts. The following data is available for November. Actual output equals budgeted output (600 units). Standard costs for 600 units: - Materials: 2 100 metres × £4.00 per metre = £8 400 - Labour: 660 hours × £10.00 per hour = £6 600 Actual data: - Materials: 2 250 metres at £3.80 per metre (actual cost £8 550) - Labour: 630 hours at £10.40 per hour (actual cost £6 552) Calculate the four individual cost variances (material price, material usage, labour rate, labour efficiency) and prepare a total cost reconciliation statement reconciling total standard cost to total actual cost. (8 marks)
Ashton Sportswear Ltd budgeted to produce and sell 500 units in March. Actual production and sales were 600 units. Standard data per unit: The following variances have been calculated for March: Prepare a profit reconciliation statement for March, reconciling budgeted profit to actual profit. Note: because actual output differs from budgeted output, you should use the change in contribution rather than the sales volume variance. (8 marks)
Kingsford Candles Ltd is considering introducing a standard costing system. A director has stated: "Standard costing will help us control costs and motivate our workforce." Evaluate whether a standard costing system would be beneficial for Kingsford Candles Ltd. Consider both the advantages and disadvantages. (10 marks)