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 as standard 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 were produced using 87,300 meters of pipe. The materials price variance is recognized when materials are purchased.

Required: Materials price and quantity variances.

Solution:

Problem 2:

Materials Variance Analysis:

The standard price for material 3-291 is $3.65 per liter. During November, 2,000 liters were purchased at $3.60 per liter. The quantity of material 3-291 issued during the month was 1775 liters and the quantity allowed for November production was 1,825 liters. Calculate materials price variance, assuming that:

Required: Materials price variance, assuming that:

1. It is recorded at the time of purchase (Materials purchase price variance).
2. It is recorded at the time of issue (Materials price usage variance).

Solution:

Problem 3:

Labor Variance Analysis:

The processing of a product requires a standard of 0.8 direct labor hours per unit for Operation 4-802 at a standard wage rate of $6.75 per hour. The 2,000 units actually required 1,580 direct labor hours at a cost of $6.90 per hour.

Required: Calculate:

1. labor rate variance or Labor price variance.
2. Labor efficiency or usage or quantity variance.

Solution:

Problem 4:

Factory Overhead Variance Analysis:

The Osage Company uses a standard cost system. The factory overhead standard rate per direct labor hour is:

For October, actual factory overhead was $11,000 actual labor hours worked were 4,400 and the standard hours allowed for actual production were 4,500.

Required: Factory overhead variances using two, three and four variance methods.

Solution:

Problem 5:

Variance Analysis:

On May 1, Bovar Company began the manufacture of a new mechanical device known a “Dandy.” The company installed a standard cost system in accounting for manufacturing costs. The standard costs for a unit of Dandy are:

The following data were obtained from Bovar’s record for may:

Required:

1. Standard quantity of materials allowed (in pounds).
2. Actual quantity of materials used (in pounds).
3. Standards hours allowed.
4. Actual hours allowed.
5. Actual direct labor rate.
6. Actual total factory overhead.

Solution:

You may also be interested in other articles from “standard costing and variance analysis” chapter

1. Standard Costs and Management By Exception
2. Setting Standard Costs – Ideal Versus Practical Standards
3. Direct Materials Price and Quantity Standards
4. Direct Materials Price Variance
5. Direct Materials Quantity Variance
6. Direct Labor Rate and Efficiency Standards
7. Direct Labor Rate/Price Variance
8. Direct Labor Efficiency | Usage | Quantity Variance
9. Manufacturing Overhead Standards
10. Overall or net factory overhead variance.
11. Controllable variance
12. Volume variance
13. Spending variance
14. Idle capacity variance
15. Efficiency variance
16. Spending variance
17. Variable efficiency variance
18. Fixed efficiency variance
19. Idle capacity variance
20. Mix and Yield Variance – Definition and Explanation
21. Materials Mix and Yield Variance
22. Labor Yield Variance
23. Factory Overhead Yield variance
24. Variance Analysis and Management By Exception
25. Managerial importance and usefulness of variance analysis
26. Advantages and Disadvantages of Standard Costing System
27. Standard Costing Discussion Questions and Answers
28. Standard Costing and Variance Analysis Formulas
29. Standard Costing and Variance Analysis Problems and Solution
30. Standard Costing and Variance Analysis Case Study