Reviewer for STANDARD COSTING Problem 1: Faring Company C ompany produces many products for household use. Company sells products to storekeepers as well as to customers. DetergentDX is one of the products of Faring Company. It is a cleaning product that is produced, packed packed in large boxes and then sold to customers and storekeepers.
Faring Company uses a traditional standard costing system to control costs and has established the following materials, labor and oerhead standards to produce one box of Detergent-DX! Direct materials! ".# pounds $ P12 p pe er pound Direct labor! '.( hours P24 p pe er hour *ariable manufacturing oerhead! '.( hours $ P5.00
%"&.'' %").)' %+.'' +#.)'
During ugust '"), company produced and sold +,''' boxes of DetergentDX. 8,000 o!"#$ of direct materials were purchased $ purchased $ P11.50 per pound. /ut of these &,''' pounds, %,000 o!"#$ were used during ugust. 0here was no inentory at the beginning of ugust. 1,%00 #ire&' l(bor )o!r$ were recorded during the month at a cost of P40,000. 0he ariable manufacturing oerhead costs during ugust totaled P*,200. dditional Informations! +,''' x ".# pounds 1 4,500 o!"#$ 23tandard 4uantity5 +,''' x '.( 1 1,800 #ire&' l(bor )o!r$ 23tandard D6 allowed5 7,''8",('' 1 4.5 2ctual 9ate5 Required: (. Compute materials price ariance and materials :uantity ariance. 2ssume that the materials price ariance is computed at the time of purchase.5 +2 '$ b. Compute direct labor rate ariance and direct labor e;ciency ariance. +2 '$ &. Compute ariable oerhead spending ariance and ariable oerhead e;ciency ariance. +2 '$ Solution:
+( Materials +( Materials variances:
1 2&,''' pounds = %"".#'5 > 2&,''' pounds = %"5 1 %?,''' > %?(,''' 1 P4, P4,000 000 -(vor -(vor(bl (ble e
1 2(,''' pounds = %"5 > 2),#'' pounds = %"5 1 %7,''' > %#),''' 1 P18,000 "f(vor(ble +b Labor variances: Direct labor rate ariance 1 2ctual direct labor hours worked x ctual rate5 - 2ctual direct labor hours worked x 3tandard rate5
1 %)',''' > 2",('' hours = %)5 1 %)',''' > %+&,)'' 1 P1,%00 "f(vor(ble Direct labor e;ciency ariance 1 2ctual direct labor hours worked x 3tandard rate5 2standard direct labor hours allowed x 3tandard rate5
1 2",('' hours = %)5 > 2",&'' hours = %)5 1 %+&,)'' > %)+,'' 1 P4,800 -(vor(ble +/ Variable overhead variances: *ariable oerhead spending ariance 1 2ctual hours worked x ctual rate5 - 2ctual hours worked x 3tandard rate5
1 2",('' hours = %).#5 > 2",('' hours = %#5 1 %7,'' > %&,''' 1 P800 -(vor(ble *ariable oerhead e;ciency ariance 1 2ctual hours worked x 3tandard rate5 23tandard hours allowed x standard rate5
1 2",('' hours = %#5 > 2",&'' hours = %#5 1 %&,''' > %?,''' 1 P1,000 -(vor(ble
Problem 2: Lukring Corporation is a large company that produces a lot of products. /ne of the product is a paint that is stored in containers. 0he ariable standard cost per container is gien below!
Direct materials Direct labor *ariable manufacturing oerhead
4uantity 8 @ours ( liters 1 )o!r
%er liter 8 %er hour % P
3tandard cost %" %?
" hour
P%
%( AA> %) AA>
0he direct materials to produce this product is aailable in li:uid form. During
Required: (. Compute actual direct labor hours worked during the month of
dditional Informations! P40,950/6,500 = P6.3 (Actual Rate) Solution:
+( Actual direct labor hours worked during May:
3tandard hours allowed at standard rate 2(,''' hours = %(5 %+(,''' dd! unfaorable e;ciency ariance +,''' ctual hours worked at standard rate %+?,''' (,''' containers x " hour ctual hours worked 1 ctual hours worked at standard rate 8 3tandard rate 1 %+?,''' 8 %( 1 %,500 )o!r$ +b Variable manuacturing overhead spending variance:
*ariable oerhead spending ariance 1 2ctual hours worked x ctual rate5 2ctual hours worked x 3tandard rate5 1 2(,#'' hours = %(.+5 > 2(,#'' hours = %(5 1 %)',?#' > %+?,''' 1 P1,50 "f(vor(ble +& Labor variances: Direct labor rate ariance 1 2ctual direct labor hours worked x ctual rate5 - 2ctual direct labor hours worked x 3tandard rate5 = P55,900 – (6,500 hours × P9) = P55,900 – P58,500 = P2,600 Favorable
Direct labor e;ciency ariance 1 2ctual direct labor hours worked x 3tandard rate5 2standard direct labor hours allowed x 3tandard rate5 = (6,500 hours × P9) – (6,000 hours × P9) = P58,500 – P54,000 = P4,500 Unfavorable
