Variance Analysis

If the purchasing manager makes a decision to buy cheaper, inferior raw materials, which

THREE of the following variances are most likely to result?

• favourable material usage

• adverse material usage

• favourable material price

• favourable labour efficiency

• adverse labour efficiency

A product has standard material cost of $32 (4 kg × $8). During May, 3,000 kg were

purchased at a cost of $23,000. The material usage variance for May was $1,600 adverse

and the material price variance was $1,000 favourable. The company hold no inventory. What was the actual production level for May?

• 700 units

• 750 units

• 800 units

• 850 units

Which TWO of the following is a possible cause of an adverse labour efficiency variance?

• The original standard time was set too high

• The employees were more skilled than had been planned for in the standard

• Production volume was lower than budgeted

• An ideal standard was used for labour time

• A lower grade of material was used in production

FGH has calculated the following variances for the latest period:

$

Sales volume contribution variance 13,420 (F)

Material usage variance 5,400 (F)

Labour rate variance 310 (A)

Variable overhead expenditure variance 6,250 (A)

All other variances were zero.

The budgeted contribution for the period was $37,200.

Calculate the actual contribution reported for the period.

Which TWO of the following statements regarding standard costing are correct?

• Standard costing is a useful technique in dynamic environments.

• Standard costing is less useful in today’s environment because simply achieving standard is no longer seen as acceptable.

• Standard costing has been criticised as it generally places emphasis on labour variances which is no longer appropriate with the increasing use of automated production techniques

• Standard costing is only really useful in manufacturing environments.

• Standard costing encourages companies to strive for continuous improvement.

T's materials price variance for the month of January was $1,000 F and the usage variance

was $200 F. The standard material usage per unit is 3 kg and the standard material price is

$2 per kg. 500 units were produced in the period. Opening inventory of raw materials was

100 kg and closing inventory was 300 kg.

Calculate the material purchases in the period.

The standard selling price of product Y is $34 per unit and the standard variable cost is $20 per

unit. Budgeted sales volume is 45,000 units each period.

Last period a total of 46,000 units were sold and the revenue achieved was $1,495,000.

The sales volume contribution variance for the period was $

• 69,000 Adverse

• 14,000 Favorable

• 69,000 Favorable

• 14,000 Adverse

Z uses a standard costing system and has the following labour cost standard in relation to

one of its products:

4 hours skilled labour @ $6.00 per hour $24.00

During October 20X9, 3,350 units of this product were made which was 150 units less than

budgeted. The labour cost incurred was $79,893 and the number of direct labour hours

worked was 13,450.

The direct labour variances for the month were:

• Rate - $804 (F) Efficiency - $300 (A)

• Rate - $804 (F) Efficiency - $300 (F)

• Rate - $807 (F) Efficiency - $297 (A)

• Rate - $807 (F) Efficiency - $300 (A)

M uses a standard costing system, with its material inventory account being maintained at

standard costs. The following details have been extracted from the standard cost card in

respect of direct materials:

Material = 8 kg @ $0.80/kg = $6.40 per unit.

Budgeted production in April 20X9 was 850 units.

The following details relate to actual materials purchased and issued to production during

April 20X9 when actual production was 870 units:

Materials purchased 8,200 kg costing $6.888

Materials issued to production 7,150 kg

Which of the following correctly states the material price and usage variances to be

reported?

• $286 (A) $152 (A)

• $328 (A) $280 (A

• $286 (A) $294 (A)

• $328 (A) $152 (A)

Which TWO of the following statements regarding the balanced scorecard are correct?

• The learning and growth perspective focuses on the need for continual improvement of existing products and techniques

• The goal of reducing staff turnover would be used in the learning and growth perspective

• The balanced scorecard uses only non-financial performance measures

• The goal of increasing return on capital employed would be used in the financial perspective

• The four perspectives in the balance scorecard are customer, internal effectiveness, profit and learning and growth