This Accounting Materials are brought to you by www.everything.freelahat.

com

CHAPTER 7
STANDARD COSTING and VARIANCE ANALYSIS

[Problem 1]
1. Qty. Unit Price Amount
Actual 17,000 P3.30 P56,100
Less: Standard (6,000 x 3) 18,000 3.00 54,000
Variance-UF (F) (1,000)F P0.30 UF P 2,100 UF

2. MPV = P0.30 UF x 17,000 = P 5,100 UF

MQV = (1,000) F x P3.00 = P(3,000) F

[Problem 2]
1. Invoice price [(P50,000/2 tons) 1,000 kgs.] P25.00 /kg
Shipping costs [P10,000/10) / 2,000 kgs.] 0.50 /kg
Trade discount (P25 x 5%) ( 1.25 /kg)
Standard purchase price ` P24.25 /kg
Standard purchase price per gram
(P24.25 1,000 grams) P0.02425

2. Standard quantity of materials that passes final inspection 19 gms.

3. Net materials per final good unit 19 grams

Yield rate (1 0.0625) 0.9375
Materials input per finished unit 20.27
X Adjustment factor for final inspection 20/19
Gross materials input per finished unit 21.33 grams

Standard materials cost:

Material Eh-Eh = 21.33 gms @ P0.02425 = P0.51725 /unit

[Problem 3]
1. Standard DL hours (4,400 units x 15/60) 1,100 hrs.
x Standard DL rate per hour P 12
Standard DL cost P13,200

2. Amount Hrs. Rate/ hr.

Actual DL cost P14,161 1.190 P11.90
Less: Standard DL cost 13,200 1.100 12.00
DL Cost Variance UF(F) P 961 UF 90 UF P (0.10) F

3 LRV = P(0.10) F x 1.190 hrs. = P(119) F

LEV = 90 UF x P12.00 = P1.080 UF

[Problem 4]
1. Standard DLH = 22,000 batches x 2.5 hrs. = 55,000 hrs.

2. Standard DLH 55,000 hrs.

Change in hrs. (P24,000 F/ P8) 3,000 F
This Accounting Materials are brought to you by www.everything.freelahat.com

Actual DLH 52,000 hrs

3. Standard DL rates P 8 per hour

Change in rate (P55,120 UF/52,000 hrs) 1.06 UF
Actual DL rate P 9.06

Total labor variance P31,120 UF

Labor efficiency variance 24,000 F
Labor rate variance P55,120 UF

[Problem 5]

1. 31,500 oz. 7. (P10,150) F

2. 45,000 hrs. 8. (P0.50) F
3. (P0.05) F and (P1,500) F 9. (P21,500) F
4. (P1,400) F 10. (P4.89) F
5. (3,500) F 11. (P22,000) F
6. (8,750) F 12. (P43,500) F

a. Materials costs variance analyses:

Qty. Unit Price Amount
Actual 28,000 P2.45 P68,600
Standard (4,500 x 7) 31,500 2.50 78,750
Variances UF(F) (3,500) F P (0.05) F P(10,150) F

MQV = (3,500) F x P2.50 = P(8,750) F

MPPV = P(0.05) F x 30,000 oz = P(1,500) F
Mat. usage price var = P(0.05) F x 28,000 oz = P(1,400) F

b. DL costs variance analyses:

Hrs. Rate/ Hr. Amount
Actual 43,000 P10.50 P451,500
Standard (4,500 x 10) 45,000 11.00 495,000
Variances UF(F) (2,000) F P (0.50) F P(43,500) F

LRV = P(0.50) F x 43,000 = P(21,500) F

LEV = (2,000) F x P11.00 = P(22,000) F
LEV per unit = P(22,000) F 4,500 = P(4.89) F

[Problem 6]
1. Materials cost variances:
Qty. Unit Price Amount
Actual (40,000 3,000) 37,000 P0.36 P13,320
Standard (6,200 x 6) 37,200 0.40 14,880
Variances UF(F) (200)F P(0.04)F P (1,560)F

MPPV = P(0.04) F x 40,000 = P(1,600) F

MQV = (200) F x P0.40 = (80) F
This Accounting Materials are brought to you by www.everything.freelahat.com

2. Direct labor costs variances:

Qty. Unit Price Amount
Actual 8,200 P8.20 P67,240
Standard(6,200 x 1.4) 8,680 8.00 69,440
Variances UF(F) (480)F P 0.20UF P (2,200)F

LRV = P0.20 UF x 8,200 = P1,640 UF

LEV = (480) F x P8.00 = (3,840) F

[Problem 7]
1. Actual variable overhead P56,600
Less: Budgeted variable overhead
on actual hours (16,000 hrs x P3.60) 57,600
Variable overhead spending variance P(1,000) F
2. Variable efficiency variance is zero. Actual hours and standard hours are equal at
16,000 houirs.
3. Camarines Norte Corporation
Variable Overhead Performance Report
(Date)
Actual Budget Variance
Variable Overhead Costs Actual Hours UF(F)
Utilities P21,000 P22,400 P(1,400) F
Supplies 3,500 3,200
300 UF
Maintenance 19,700 19,200 500 UF
Miscellaneous 12,400 12,800 (400) F
Totals P56,600 P57,600 P(1,000) F

[Problem 8]
1. (a) (b)
at Normal Capacity at Budgeted Capacity
Variable overhead P2.20 P2.20
Fixed overhead
(P90,000/24,000) 3.75 4.50
Total overhead rates P5.95 P6.70

2. a. Standard hours = [7,000 units x (24,000/8,000)] = 21,000 hrs.

b. Normal capacity 24,000 hrs.
Less: Standard hours 21,000
Volume variance in hours 3,000 UF
X Fixed overhead rate / hour P 3.75
Volume variance in pesos P11,250 UF

[Problem 9]
1. North South Central
Normal volume 22,000 40,000 41,000
Less: Standard hours 20,000 38,000 41,000
Volume variance in hrs. 2,000 UF 2,000 UF 0
X Fixed overhead rate/hr. P 2 P 4 P 6
Volume variance in pesos P4,000 UF P8,000 UF P 0
This Accounting Materials are brought to you by www.everything.freelahat.com

2. North South Central

Normal volume in hrs. 22,000 40,000 41,000
Less: Actual hours 21,500 37,000 42,000
Capacity variance in hrs. 500 UF 3,000 UF (1,000) F
X Fixed overhead rate/hr. P 2 P 4 P 6
Idle capacity variance P1,000 UF P12,000 UF P(6,000) F

3. North South Central

Actual hours 21,500 37,000 42,000
Less: Standard hours 20,000 38,000 41,000
Inefficiency(Efficiency) in hrs. 1,500 UF (1,000) F 1,000 UF
X Fixed overhead rate/hr. P 2 P 4 P 6
Fixed overhead efficiency
variance P3,000 UF P(4,000) F P6,000 UF

[Problem 10]
1. Actual fixed overhead P88,000
Spending variance 4,000 F
Budgeted fixed overhead 92,000
Normal capacity 20,000 MH

2. Fixed overhead rate per hr. P 4.60

3. Fixed OH rate per unit = P4.60/MH x 3 = P13.80/ unit

4. Normal capacity 20,000 hrs.

Less: Standard capacity (9,500 x 3) 28,500
Volume variance in hrs. (8,500) F
X Fixed overhead rate per hour P 4.60
Volume variance in pesos P(39,100) F

[Problem 11]

1. Actual factory overhead (P39,000 + P29,000) P68,000

Less: Budget allowed on standard hours:
Fixed (24,000 x 15/60 = 6,000 x P8) P30,000
Variable (25,000 x 15/60 = 6,250 x P6) 37,500 67,500
Controllable variance P 500 UF

Budget allowed on standard hours P67,500

Less: Standard factory overhead
(6,250 hrs. x P11) 68,750
Volume variance P(1,250) F

2. Spending variance:
Actual factory overhead P68,000
Less: Budget allowed on actual hours:
Fixed P30,000
Variable (6,400 x P6) 38,400 68,400 P(400) F
Variable efficiency variance:
This Accounting Materials are brought to you by www.everything.freelahat.com

BAAH 68,400
Less: BASH 67,500 900 UF
Volume variance:
BASH 67,500
Less: SH x SR 68,750 (1,250)F
Net overhead variance P (750) F

3. Budget variance:
AFOH P68,000
Less: BAAH 68,400 P (400) F
Capacity variance:
BAAH 68,400
Less: Actual hrs. x std. OH rate
(6,400 hrs. x P11) 70,400 (2,000) F
Efficiency variance:
Actual hrs x Std OH rate 70,400
Les: Standard hrs. x Standard rate
(6,250 hrs. x P11) 68,750 1,650 UF
Net OH variance P (750) F

4. Spending variance:
AFOH P68,000
Less: BAAH 68,400 P(400) F
Variable efficiency variance:
BAAH 68,400
Less: BASH 67,500 900 UF
Idle capacity variance:
BAAH 68,400
Less: Actual hrs x Std. OH rate 70,400 (2,000) F
Fixed efficiency variance:
Actual hours 6,400 hrs.
Less: Standard hrs. 6,250 hrs.
Efficiency in hours 150 UF
X Fixed overhead rate P 5 750 UF
Net overhead variance P(750) F

[Problem 12]
Standard hours per unit = 3,600,000 / 720,000 = 5 hrs.
Total standard hours = 66,000 x 5 = 330,000 hrs.

1. Standard (allocated) OH = 330,000 hrs x P1.20 = P396,000

2. Actual variable overhead P186,000
Less: Budgeted variable overhead
on actual hours(315,000 x P0.59) 185,850
Variable OH spending variance P 150 UF

3. Actual fixed overhead P189,000

Less: Budgeted fixed overhead 183,000
Fixed OH spending variance P 6,000 UF

4. Actual hours 315,000 hrs.

This Accounting Materials are brought to you by www.everything.freelahat.com

Less: Standard hrs. 330,000 hrs.

Efficiency in hrs. (15,000) F
X Variable overhead rate P 0.59
Variable OH efficiency variance P(8,850) F

5. Normal capacity (3,600,000/12) 300,000 hrs.

Less: Standard capacity 330,000 hrs.
Over Absorbed capacity (30,000) F
X Fixed overhead rate P 0.61
Volume variance P(18,300) F

[Problem 13]
1. Storm Company
Overhead Performance Report Dye Division
For the Month Ended March 31, 20__

Variance -
Actual Budget UF(F)
Machine hours 25,000 24,000 1000 UF
Variable overhead:
Indirect labor P 21,000 P 18,750 P 2,250 UF
Supplies 5,600 5,000 600 UF
Utilities 29,000 25,000 4,000 UF
Setup time 14,000 12,500 1,500 UF
Total variable costs 69,600 61,250 8,350 UF
Fixed overhead:
Maintenance 62,000 60,000 2000 UF
Inspection 80,000 80,000 ~~
Total fixed costs 142,000 140,000 2000 UF
Total overhead costs P 211,600 P 201,250 P 10,350

2. Variance overhead per hour = P73,500 / 30,000 = P2.45

[Problem 14]
1. Materials costs variances; 2-way method

Qty. Unit Price Amount

Actual 29,050 P 2.90 P 84,245
Less: Standard
(4,800 x 6) 28,800 3.00 86,400
Variances - UF(F) 250 UF P (0.10) P (2,155) F

MQV = 250 UF x P3.00 = P 750 UF

Mat. purchase price var = P(0.10) F x 30,000 = P(3,000) F
2. Direct labor costs variance:
Hrs. Rate/hr. Amount
Actual 10,000 P 12.20 P 122,000
This Accounting Materials are brought to you by www.everything.freelahat.com

Less: Standard
(4,800 x 2) 9,600 12.00 115,200
Variances - UF(F) 400 UF P 0.20 P 6,800 UF

LRV = P0.20 UF x 10,000 = P2,000 UF

LEV = 400 UF x P12.00 = 4,800UF
Net DL Cost Variance P6,800 UF

3.
Actual factory overhead
(P230,000 + P55,100) P 285,000
Less: Standard factory overhead (9,600 x P35.47) 340,512
Net overhead variance P (55,412)F

Standard OH rate = P29.47 + P6 = P35.47 (based on 9,000 hrs.)

4.
Actual variable overhead P 230,000
Less: Budgeted variable overhead at actual hours
(10,000 x P29.47) 294,700
Variable overhead spending variance P (64,700) F

Actual hours 10,000 hrs

Less: Standard hours 9,600
Inefficiency in hours 400 UF
x Variable overhead rate P 29.47 per hr
Variable overhead efficiency variance P 11,788 UF

5.
Fixed spending variance:
Actual fixed overhead P 55,100
Less: Budgeted fixed overhead 54,000 P 1,100 UF
Idle capacity variance:
Normal capacity 9,000 hrs
Less: Actual capacity 10,000
Capacity variance in hours (1,000)
x Fixed overhead rate(P54,000/9,000) P 6 (6,000) F
Fixed efficiency variance:
Actual hours 10,000 hrs
Less: Standard hours 9,600
Inefficiency in hours 400 UF
x Fixed overhead rate P 6 2,400 UF
Net fixed overhead variance P (2,500) F

[Problem 15]

Mat. purchase - price

1. variance = (P6.10 - P6.00) x 9,200 lbs. = P 920 UF
This Accounting Materials are brought to you by www.everything.freelahat.com

Materials quantity variance = (7,800 - 7,500) x P6.00 = P 1,800 UF

Actual quantity used = 9,200 lbs. - 1,400 lbs = 7,800 lbs.
Standard quantity used = 5,000 units x 1.5 = 7,500 lbs.

2. Labor rate variance = (P10.50 - P10.00) x 800 hrs = P 400 UF

Labor efficiency variance = (800 - 300) x P10 = P 5,000 UF
Standard hours = 5,000 units x 0.6 hr = 300 hrs.

3. Actual variable overhead P 14,580

Less: Budgeted variable
overhead on actual
hours (800 x P5.00) 4,000
Variable overhead spending
variance P 10,580 UF

Actual hours 800 hrs.

Less: Standard hours 300
Inefficiency in hours 500 UF
x Variable overhead rate P 5/ hr
Variable overhead efficiency
variance P 2,500 UF

[Problem 16]
1 Materials purchase - price variance = (P2.45 - P2.50) x 8,000 = P 400 UF
Materials quantity variance = (6,000 - 7,200) x P2.50 =P (3,000) F

Actual materials price = P19,600 / 8,000 = P 2.45

Actual quantity used = 8,000 - 2,000 = 6,000 units
Standard quantity used = 2,400 x 3 = 7,200 units

2 Labor rate variance = (P11.50 - P12.00) x 980 hrs. = P (490)

Labor efficiency variance = (980 - 930) x P12 = P 600

Actual labor rate = P11,270 / 980 hrs. = P 11.50

Standard labor hours = (1,700 x 0.3) + (700 x 0.6) = 930 hrs.

3 Actual variable overhead P 5,684

Less: Budgeted variable overhead on actual hours
(980 x P6) 5,880
Variable overhead spending variance P (196) F

Actual hours 980

Less: Standard hours 930
Inefficiency in hours 50 UF
x Variable overhead rate P 6
This Accounting Materials are brought to you by www.everything.freelahat.com

Variable overhead efficiency variance P 300 UF

[Problem 17]
1.
Direct materials (7,800 x 3 = 23,400 lbs x P5) P 117,000
Direct labor (7,800 x 5 = 39,000 hrs x P15) 585,000
Variable overhead (39,000 hrs x P6) 234,000
Fixed overhead ( 39,000 x P8) 312,000
Standard manufacturing costs P 1,248,000
2.
a MPV = (P5.20 - P5) x 23,100 = P 4,620 UF
b MEV = (23,100 - 23,400) x P5 = P (1,500) F
c LRV = (P14 - P15) x 40,100 hrs = P (40,100) F
d ActualLEV
FOH = (40,100 - 39,000) x P15 = P 16,500 UF P 600,000
e
Less: Budget allowed on actual hours:
Fixed (40,000 x P8) P 320,000
Variable (40,100 x P6) 240,600 560,600
Overhead spending variance P 9,400 UF

f Actual hours 40,100 hrs

Less: Standard hours 39,000 hrs
Inefficiency in hours 1,100 UF
x Variable overhead rate P 6
Variable OH efficiency variance P 6,600 UF

g Normal capacity 40,000 hrs

Less: Standard capacity 39,000 hrs
Underabsorbed capacity 1,000 UF
x Fixed overhead rate P 8
Volume variance P 8,000 UF
[Problem 8]
1. P624,000 8. P9.76
2. 1,200,000 9. P1,600,000
3. P0.52 10. 330,000 MH
4. P572,000 11. P4.85/MH
5. 1,100,000 lbs. 12. P430,000
6. P2,049,600 13. 100,000 units
7. 210, hrs. 14 300,000 MH

Analysis:
a. Standard mat. quantity (100,000 x 10 lbs.) 1,000,000 lbs.
Change in quantity (P50,000 UF P0.50) 100,000 UF
Actual mat. used 1,100,000 lbs

b. P 24,000 UF = (AP P0.50) x (1,100,000 + 100,000)

P 24,000 UF = (AP P0.50) x 1,200,000 lbs.
P 24,000 = 1,200,000 AP 600,000
This Accounting Materials are brought to you by www.everything.freelahat.com

P624,000 = 1,200,000 AP
P624,000
AP = 1,200,000 = P0.52

c. DM purchases = 1,200,000 lbs. x P0.52 = P624,000

d. DM used = 1,100,000 lbs. x P0.52 = P572,000

e. Standard hours (100,000 x 2) 200,000 hrs

Change in hrs (P100,000 UF/P10) 10,000 UF
Actual hours 210,000 hrs.

f. P(50,000) F = (AR- P10) x 210,000

P(50,000) = 210,000 AR 2,100,000
P2,050,000 = 210,000 AR
P2,050,000
AR = = P9.76
210,000

g. Actual DL cost = 210,000 hrs x P9.76 = P2,049,600

h. Standard machine hours (100,000 x 3) 300,000 hrs

Variable overhead efficiency variance P150,000 UF
Divided by variable OH rate P 5/MH
Change in machine hours 30,000 UF
Standard machine hours 300,000
Actual machine hours 330,000

i. Budgeted variable OH on actual MH

(330,000 x P5) P1,650,000
Variable OH spending variance (50,000) F
Actual variable overhead P1,600,000
Ave. variable OH (P1,600,000 / 330,000) P4.85 / MH

j. Budgeted fixed overhead P400,000

Fixed OH spending variance 30,000 UF
Actual fixed overhead P430,000

k. Normal capacity (units) 100,000 units

Normal capacity (hrs) 300,000 MH

[Problem 19].

1. a. Variable OH per DLH = P7.50 x = P5/DLH

b Budgeted fixed overhead = 2,400 DLH x P2.50 = P6,000

2.
a. Mat. purchase price variance = (P1.38 P1.35) x 18,000 yds. = P 540 UF
Materials quantity variance = (9,500 10,000) x P1.35 = P(675) F
Standard quantity = 500 x 20 yds. = 10,000 yds.
This Accounting Materials are brought to you by www.everything.freelahat.com

b. Labor rate variance = (P9.00 P8.95) x 2,100 hrs = P105 UF

Labor efficiency variance = (2,100 2,000) x P9 = P900 UF
Standard hours = 500 units x 4 hrs. = 2,000
hrs.

c. Actual factory overhead P16,650

Less: Budgeted OH on standard hours:
Fixed P 6,000
Variable (2,000 x P5) 10,000 16,000
Controllable variance P 650 UF

Budgeted OH on standard hours P16,000

Less: Standard factory OH (2,000 x P7.50) 15,000
Volume variance P 1,000 UF

[Problem 20]
1.
Equivalent Production
Units Material A Material B Material C
In-process, beg. 3,000 3,000 2,000
Started and finished 5,000 5,000 5,000 5,000
In-process, ending 5,000 5,000 2,000
Lost units 1,000 1,000 1,000 1,000
Totals 14,000 11,000 9,000 10,000

a Material A
Qty. Unit Price Amount
Actual 50,000 P 1.00 P 50,000
Less: Standard
(11,000 x 4) 44,000 1.20 52,800
Variances-UF(F) 6,000 UF P (0.20) P(2,800) F

MPV = P(0.20) F x 50,000 = P(10,000) F

MQV = 6,000 UF x P1.20 = P 7,200 UF

b Material B
Qty. Unit Price Amount
Actual 18,000 P 0.75 P 13,500
Less: Standard
(9,000 x 2) 18,000 0.70 12,600
Variances-UF(F) 0 P 0.05 UF P 900 UF

MPV = P0.05 UF x 18,000 = P900 UF

MQV = 0 x P0.70 = P 0

c Direct Labor
Hrs Rate / Hr Amount
This Accounting Materials are brought to you by www.everything.freelahat.com

Actual 10,200 P 12.00 P 122,400

Less: Standard
(10,000 x 1) 10,000 11.50 115,000
Variances - UF(F) 200 P (0.50) P 7,400 UF

LRV = P(0.50) F x 10,200 = P(5,100) F

LEV = 200 UF x P11.50 = P2,300 UF

d Controllable OH Variance

Actual P 60,100
Less: Budgeted OH on
standard hours
Fixed
(7,800 x P5) P 39,000
Variable
(10,000 x P1.80) 18,000 57,000 P 3,000 UF
Volume Variance:
Budgeted OH on
standard hours 57,000
Less: Standard OH
(10,000 x P6.80) 68,000 (11,000) F
Net OH variance P (8,000) F

[Problem 21]
1.
Equivalent Production
Conversion
Units Materials Costs
In-process, beg. 4,000 0 3,200
Started and Finished 13,000 13,000 13,000
In-process, ending 2,150 2,150 860
Lost Units 850 850 850
Totals 20,000 16,000 17,910

a Materials
Qty. Unit Price Amount
Actual 50,000 P 3.95 P 13,500
Less: Standard
(16,000 x 3) 48,000 4.00 12,600
Variances-UF(F) 2,000 UF P (0.05) F P 5,500 UF

MPV = P(0.05) F x 60,000 kgs. = P(3,000) F

MQV = 2,000 UF x P4 = P8,000
UF
This Accounting Materials are brought to you by www.everything.freelahat.com

b Direct Labor
Hrs Rate / Hr Amount
Actual 9,000 P 12.00 P 108,000
Less: Standard
(16,000 x 1/2) 8,000 11.00 88,000
Variances - UF(F) 200 P 1.00 P 20,000 UF

LRV = P1.00 UF x 9,000 = P9,000 UF

LEV = 1,000 UF x P11 = 11,000 UF

c. Factory overhead:
Actual FOH P134,900
Less: Standard FOH (8,000 x P14) 112,000
Net OH variance P 22,900 UF

Spending variance:
AFOH P134,900
Less: Budgeted OH on actual hours:
Fixed P80,000
Variable (9,000 x P6) 54,000 134,000 P 900 UF

Variable efficiency variance:

Budgeted OH on actual hours 134,000
Budgeted OH on standard hours;
Fixed P80,000
Variable (8,000 x P6) 48,000 128,000 6,000 UF

Volume variance:
Budgeted OH on standard hours 128,000
Less; Standard FOH (8,000 x P14) 112,000 16,000 UF
Net overhead variance P22,900 UF

[Problem 22]

1. Standard costs
Total
Equivalent Materials Labor Overhead Standard
Lot Productions Qty Rate Amt Hrs Rate Amt Hrs Rate Amt Costs

22 1,000 24,000 P1.10 P26,400 3,000 P4.90 P14,700 3,000 P4.00 P12,000 P53,100

23 1,700 40,800 1.10 P44,880 5,100 4.90 24,990 5,100 4.00 20,400 90,270

24 1,200 (mat) 28,800 1.10 P31,680

960 (CC) 2,880 4.90 14,112 2,880 4.00 11,520 57,312

2. Materials purchase- price variance = (AP-SP) x AQ Purchased

= (P1.12-P1.10) x 95,000 yds..
= P1,900 UF
This Accounting Materials are brought to you by www.everything.freelahat.com

3. a. Materials quantity variance = (AQ -SQ) x Standard Price

Lot 22 = (24,100 - 24,000) x P1.10) = P 110.00 UF
Lot 23 = (40,440 - 40,800) x P1.10) = ( 396.00) F
Lot 24 = (28,825 - 31,680) x P1.10) = ( 3,140.50) F
Net materials quantity variance P(3,426.50) F

b. Labor efficiency variance = (AH-SH) x Standard rate

Lot 22 = (2,980 - 3,000) x P4.90 = P(98) F
Lot 23 = (5,130 - 5,100) x P4.90 = 147 UF
Lot 24 = (2,890 - 2,880) x P4.90 = 49 UF
Net labor efficiency variance P 98 UF
c. Labor rate variance = (AR-SR) x Actual hours
= (PS -P4.90) x 11,000 hrs.
Actual labor rate = P55,000 / 11,000 = P 5 / hr.

4. Controllable overhead variance:

Actual FOH P45,600
Less: Budgeted OH on actual hours:
Fixed [(P576,000/12) x 40%] P19,200
Variable ( 11,000 x P2.40) 26,400 45,600 P 0

Volume Variance:
Budgeted OH on actual hours 45,600
Less: Standard overhead (11,000 x P4) 44,000 1,600 UF
Net overhead variance P1,600 UF

Fixed rate per hour = {[(576,000 x 40%)/48,000] / 3 hrs.} = P1.60

Var. OH rate per hr. = {[(576,000 x 60%)/48,000] / 3 hrs.} = 2.40
Total standard OH rate P4.00

or:
Fx OH rate = P4.00 x 40% = P1.60
Variance OH rate = P5.00 x 60% = P2.40

[Problem 23]
a. Material's costs Variances:
Raw Materials Drums
Qty Unit Price Amount Qty Unit Price Amount
Actual 700,000 P 1.9167 P1,341,890 60,000 P1.00 P60,000
- Standard 600,000 2.0000 1,200,000 60,000 1.00 60,000
Variances UF(F) 100,000 UF P(0.0833) F P 141,690 UF 0 0 0

Mat. purchase - price var. = P(0.0833) F x 600,000 gals. = P(49,980)F

Mat. quantity variance = 100,000 UF x P0.0833 = P 8,330 UF

b. Direct labor costs variance:

Hrs. Rate/Hr. Amount
Actual 65,000 P7.2308 P470.000
- Standard (60,000 x 1) 60,000 7.0000 420.000
Variances - UF (F) 5,000 UF P0.2308 UF P50.000 UF
This Accounting Materials are brought to you by www.everything.freelahat.com

Labor rate variance = P0.2308 UF x 65,000 = P15,000 UF

Labor efficiency variance = 5,000 UF x P7.000 = P35.000 UF

c. Factory overhead costs variances:

Actual factory overhead P 666,500
Less: Standard factory overhead (60,000 x P10) 600,000
Net overhead variance P 66,500 UF

Spending variance:
Actual factory overhead P666,500
Less: Budgeted OH on actual hours:
Fixed (68,750 x P4) P 275,000
Variable (65,000 x P6) 390,000 665,000 P 1,500 UF

Variable efficiency variance:

Budgeted OH on actual hours 665,000
Less: Budgeted OH on standard hours:
Fixed 275,000
Variable (60,000 x P6) 360,000 635,000 30.000 UF

Idle capacity variance:

Budgeted OH on actual hours 665,000
Less: Actual hours at standard
overhead rate (65.000 x P10) 650.000 15.000 UF

Fixed efficiency variance:

Actual hours 65.000
Less: Standard hours 60.000
Inefficiency in hours 5.000 UF
X Fixed OH rate P 4 20,000 UF
Net overhead variance P66,500 UF

[Problem 24]
1. Materials price variance:
Actual materials cost P51,710.00
Less: Actual quantity at standard price
Maxan (8.480 x P2.00) P16,960
Sales (25,200 x P0.75) 18,900
Cralyn (18,540 x P1.00) 18,540 54.400.00 P(2,690.00) F

Materials Mix variance:

Actual quantity at standard price 54.400.00
Less: Actual quantity at standard
input cost (52,220 x P1.04) 54.308.80 91.20 UF

Materials Yield Variance:

Actual quantity at standard input cost 54.308.80
Less: Actual output at standard output cost (4,000 x P13) 52.000.00 2,308.80 UF
Net Materials cost variance P( 290.00) F
This Accounting Materials are brought to you by www.everything.freelahat.com

(1)
Standard input cost = (P650/P625) = P1.04 / gal.

(2) Analysis of mix variance per each material:

Mix Variance Mix Variance
Actual Actual input at in gals. Standard in pesos
Materials input standard mix UF (F) Price UF(F)
Maxan 8,480 52.220 x 100/625 = 8,355.20 124.80 UF P2.00 P249.60 UF
Salex 25,200 52.220 x 300/625 = 25,065.60 134.40 UF 0.75 100.80 UF
Cralyn 18.540 52.220 x 225/625 = 18,799.20 (259.20) 1.00 ( 259.20)F
52,220 52,140.00 P 91.20 UF

2. How could each variance help to control the cost of materials?

a. Material price variance- gives a signal on the direct cost of buying the materials
over and above the standard price. The cost of purchases is indiscriminately
important as it defines the level of cost of production at the early stage of
operations. It is important to materials manager and production managers to
routinely investigate materials price variances.
b. Materials mix variance - shares the quality of mixing made by a company as of a
given production process. It gives a hint as to the ability of the production
manager to adhere to the standard production mix for cost effectiveness and
quality produce. Adherence to the mixing of materials need not be
overemphasized.
c. Materials yield variance - represents the output should have been produced and
its difference with the actual output given a particular amount of materials used in
the production process. This measures productivity rate derived in a particular
process.