Page 299 - P1 Integrated Workbook STUDENT 2018

Answers to supplementary objective test questions

CHAPTERS 7 AND 8 – STANDARD COSTING AND VARIANCES

3.1 B

The materials efficiency variance is based on the quantity of materials issued to
production (88,000 kg).

The standard quantity used should have been 10 kg × 8,700 units = 87,000 kg.

There is therefore an adverse variance of 87,000 – 88,000 = 1,000 kg.

At the standard price of $6 per kg this provides an overall variance of $6,000
adverse.

3.2 The answer is $26,350.

The actual hourly rate of pay was = $685,100/26,350 hours = $26 per hour.

This is $1 more than the standard rate of $25 per hour. For the actual hours
paid of 26,350, this gives an adverse variance of $26,350.

3.3 D

The fixed overhead absorption rate = $40,000/20,000 hours = $2 per hour.

The absorbed overhead = $2 per hour × 19,500 hours = $39,000.

This provides a capacity variance = $39,000 - $40,000 = $1,000 adverse.

3.4 The answer is $0.68.

$
Actual cost 14,520
Price variance 440
––––––

Actual purchases at standard price 14,960
––––––
The standard price per kg = $14,960/22,000 kg = $0.68 per kg.

3.5 The answer is $700.

The standard cost per hour is = $7,000/500 hours = $14 per hour.

50 hours extra were worked (550 hours compared to 500 hours) than the
standard. This will give an adverse variance = 50 hours × $14 = $700.

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