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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 relevant articles:

• Standard Costs - Management by Exception
• Setting Standard Costs - Ideal Versus Practical Standards
• Direct Materials Price and Quantity Standards
• Direct Materials Price Variance
• Direct Materials Quantity Variance
• Direct Labor Rate and Efficiency Standards
• Direct Labor Rate | Price Variance
• Direct Labor Efficiency | Usage | Quantity Variance
• Manufacturing Overhead Standards
• Overall or net factory overhead variance
• Factory Overhead Controllable variance
• Factory Overhead Volume variance
• Factory Overhead Spending variance
• Factory Overhead efficiency variance
• Variable Overhead efficiency variance
• Fixed overhead efficiency variance
• Factory Overhead idle capacity variance
• Mix and Yield Variance - Definition and Explanation
• Materials Mix and Yield Variance
• Labor Yield Variance
• Factory Overhead Yield variance
• Variance Analysis and Management By Exception
• Managerial importance and usefulness of variance analysis
• Advantages and Disadvantages of Standard Costing System
• Standard Costing Discussion Questions and Answers
• Standard Costing and Variance Analysis Formulas
• Standard Costing and Variance Analysis Case Study

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