ACCA F5 Performance Management - 2010 - Study text - Emile Woolf Publishing
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Answers
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Fixed production overhead expenditure variance
$
Budgeted fixed overhead expenditure 2,400
Actual fixed overhead expenditure 2,462
Fixed overhead expenditure variance 62 (A)
Fixed production overhead volume variance
units
Budgeted production volume 12,000
Actual production volume 11,500
Volume variance in units 500 (A)
Standard fixed overhead rate per unit $0.20
Fixed production overhead volume variance in $ $100 (A)
Sales price variance
$
10,000 units should sell for (× $6)
60,000
They did sell for 62,600
Sales price variance 2,600 (F)
Sales volume profit variance
units
Actual sales volume (units) 10,000
Budgeted sales volume (units) 12,000
Sales volume variance in units 2,000 (A)
Standard profit per unit $2
Sales volume variance (profit variance) $4,000 (A)
Operating statement (standard absorption costing)
$
Budgeted profit (12,000 units × $2)
24,000
Sales price variance
2,600 (F)
Sales volume variance
4,000 (A)
22,600
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Cost variances (F)
(A)
$
$
Direct materials price 500
Direct materials usage
3,000
Direct labour rate
116
Direct labour efficiency
64
Variable production overhead
expenditure
106
Variable production o’head efficiency
16
Fixed production overhead
expenditure
62
Fixed production overhead volume
100
Total cost variances 606
3,358
2,752 (A)
Actual profit
19,848
(b)
Standard marginal costing
Sales volume contribution variance
Sales volume variance in units 2,000
(A)
Standard contribution per unit $2.20
Sales volume variance (contribution variance) $4,400
(A)
Operating statement: standard marginal costing
$
Budgeted profit
24,000
Add budgeted fixed costs
2,400
Budgeted contribution
26,400
Sales price variance
2,600
(F)
Sales volume variance
4,400
(A)
24,600
Variable cost variances (F)
(A)
$
$
Direct materials price 500
Direct materials usage
3,000
Direct labour rate
116
Direct labour efficiency
64
Variable production o’head
expenditure
106
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Variable production o’head
efficiency
16
Total variable cost variances 606
3,196
2,590
(A)
Actual contribution
22,010
Budgeted fixed overhead
expenditure
2,400
Fixed overhead expenditure
variance
62
(A)
Actual fixed production overheads
2,462
Actual profit
19,548
Note: The difference in profit is accounted for by the difference in the increase in
closing inventory (1,500 units × $0.20 per unit fixed overhead in inventory,
absorption costing = $300).
36 Standard costing
(a)
$
$
Budgeted net profit (10,000 units × $16)
160,000
Sales variances:
Sales price variance 36,000
(F)
Sales volume variance 16,000
(A)
20,000
(F)
180,000
Cost variances:
Materials variances:
Material A price variance 3,800
(A)
Material B price variance 4,040
(F)
Total material price variance
240
(F)
Material A usage variance 2,000 (A)
Material B usage variance 6,600
(A)
Total material usage variance
8,600
(A)
Labour variances:
Rate variance 11,400
(A)
Efficiency variance 9,000
(A)
20,400
(A)
Variable overhead variances:
Expenditure variance 10,000
(F)
Efficiency variance 6,000
(A)
4,000
(F)
Fixed overhead variances:
Expenditure variance 8,000
(F)
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Efficiency variance 12,000
(A)
Capacity variance 12,000
(A)
16,000
(A)
Actual profit
$139,240
Workings
Sales price variance $
9,000 units should sell for (× $80)
720,000
They did sell for 756,000
Sales price variance 36,000 (F)
Sales volume variance units
Budgeted sales units 10,000
Actual sales units 9,000
Sales volume variance in units 1,000 (A)
Standard profit per unit $16
Sales volume variance in $ $16,000 (A)
Materials price variances $
19,000 kilos of Material A should cost (× $2)
38,000
They did cost 41,800
Material A price variance 3,800 (A)
10,100 kilos of Material B should cost (× $6)
60,600
They did cost 56,560
Material B price variance 4,040 (F)
Materials usage variances
Material
A
Material
B
kilos
kilos
9,000 units of product should use (× 2
kg/1kg)
18,000
9,000
They did use 19,000
10,100
Material usage variance in kilos 1,000
(A) 1,100 (A)
Standard cost per kilo $2
$6
Material usage variance in $ $2,000
(A) $6,600 (A)
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Labour rate variance $
28,500 hours of labour should cost (× $6)
171,000
They did cost 182,400
Labour rate variance 11,400 (A)
Labour efficiency variances hours
9,000 units of product should take (× 3 hours)
27,000
They did use 28,500
Efficiency variance in hours 1,500 (A)
Standard cost per hour $6
Labour efficiency variance in $ $9,000 (A)
Variable overhead expenditure variance $
28,500 hours should cost (× $4)
114,000
They did cost 104,000
Labour rate variance 10,000 (F)
Variable overhead efficiency variance:
Efficiency variance in hours (see above): 1,500 hours (A)
Efficiency variance = 1,500 hours (A) × $4 per hour = $6,000 (A).
Fixed overhead expenditure variance $
Budgeted fixed overheads (10,000 units × $24)
240,000
Actual fixed overheads 232,000
Fixed overhead expenditure variance 8,000 (F)
Fixed overhead efficiency variance:
Efficiency variance in hours (see above): 1,500 hours (A)
Efficiency variance = 1,500 hours (A) × $8 per hour = $12,000 (A).
Fixed overhead capacity variance hours
Budgeted hours of work (10,000 units × 3 hours)
30,000
Actual hours of work 28,500
Capacity variance in hours 1,500 (A)
Standard fixed overhead cost per hour $8
Fixed overhead capacity variance in $ $12,000 (A)
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(b) Standard marginal costing
In a standard marginal costing system, the sales volume variance would be
evaluated using standard contribution per unit. The sales volume variance
would be 1,000 units (A) × standard contribution per unit $40 = $40,000 (A).
This is $24,000 higher than the sales volume variance in an absorption costing
system.
There would be no fixed overhead volume variances in marginal costing.
There would therefore be no fixed overhead efficiency or capacity variance,
totalling $12,000 + $12,000 = $24,000 (A).
Since sales and production volumes are the same, the net profit in marginal
costing is the same as the net profit in absorption costing.
37 Sales variances
Sales price variances $ $
520 units of Q should sell for (× $30)
15,600
They did sell for 14,560
Product Q sales price variance 1,040 (A)
290 units of R should sell for (× $45)
13,050
They did sell for 14,210
Product R sales price variance 1,160 (F)
90 units of S should sell for (× $65)
5,850
They did sell for 5,670
Product S sales price variance 180 (A)
Total sales price variances 60 (A)
Product Q
Product R
Product S Total
units
units
units
Budgeted sales 600
300
100
Actual sales 520
290
90
Sales volume variance (units) 80
(A)
10
(A)
10 (A)
Standard margin per unit $10
$15
$25
Sales volume variance ($) $800
(A)
$150
(A)
$250 (A) $1,200
(A)
Answers
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The sales volume variance can be analysed between a sales mix and a sales quantity
variance:
Mix variance
Actual
mix
Actual total
quantity in
standard mix
Mix
variance
Standard
margin
per unit
Mix variance
units units
units $
$
Q 520 540
20 (A) 10
200
(A)
R 290 270
20 (F) 15
300
(F)
S 90 90
-
25
0
900 900
100
(F)
Average standard margin per unit = $(6,000 + 4,500 + 2,500)/1,000 units
= $13 per unit
Total
units
Budgeted sales 1,000
Actual sales 900
Sales volume variance (units) 100 (A)
Average standard margin per unit $13
Sales volume variance ($) $1,300 (A)
38 Mix and yield variances
$
5 litres of material P should cost (× $0.70)
3.50
5 litres of material Q should cost (× $0.92)
4.60
10 litres of input material should cost 8.10
= 9 litres of finished product (lubricant)
Standard material cost per litre of lubricant = $8.10/9 litres = $0.90 per litre.
Standard average cost per litre of input = $8.10/10 litres = $0.81 per litre.
Total material cost variance $
92,070 litres of lubricant should cost (× $0.90)
82,863
They did cost ($36,000 + $53,350) 89,350
Total material cost variance 6,487 (A)
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Materials price variances $
$
45,000 litres of Material P should cost (× $0.70)
31,500
They did cost 36,000
Material P price variance
4,500 (A)
55,000 litres of Material Q should cost (× $0.92)
50,600
They did cost 53,350
Material Q price variance
2,750 (A)
Total material price variances
7,250 (A)
Materials usage variances Material P
Material
Q
litres
litres
92,070 litres of lubricant should use (× 10/9 × 50%)
51,150
51,150
They did use 45,000
55,000
Material usage variance in kilos 6,150
(F) 3,850
(A)
Standard cost per kilo $0.70
$0.92
Material usage variance in $ $4,305
(F) $3,542
(A)
Total material usage variance = $4,305 (F) + $3,542 (A) = $763
(F)
Mix variance
Actual
mix
Actual total
quantity in
standard mix
Mix
variance
Standard
cost per
litre
Mix
variance
litres
litres
litres
$ $
P 45,000
50,000
5,000
(F) 0.70 3,500
(F)
Q 55,000
50,000
5,000
(A) 0.92 4,600
(A)
100,000
100,000
1,100
(A)
Materials yield variance litres
92,070 litres of lubricant should use (× 10/9)
102,300
They did use (45,000 + 55,000) 100,000
Yield variance in litres 2,300
(F)
Standard average cost per litre of input $0.81
Materials yield variance in $ $1,863
(F)
Answers
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Summary $
$
Materials price variances
7,250
(A)
Materials mix variance 1,100
(
A)
Materials yield variance 1,863
(
F)
Materials usage variance
763
(F)
Total materials cost variance
6,487
(A)
39 More mix and yield
(a)
Direct materials price variance $ $
6,700 kilos of material X should cost (× $8)
53,600
They did cost 51,400
Material X price variance 2,200
(F)
2,900 kilos of material Y should cost (× $12)
34,800
They did cost 39,500
Material Y price variance 4,700
(A)
Total direct materials price variance 2,500
(A)
Materials mix variance
Material
Actual
usage
Actual usage in
standard mix
Mix
variance
Standard
price per
kilo
Mix variance
kilos
kilos
kilos
$ $
X 6,700 (5) 6,000
700
(A) 8 5,600
(A)
Y 2,900 (3) 3,600
700
(F) 12 8,400
(F)
9,600
9,600
2,800
(F)
Standard weighted average cost per kilo of materials = $76/8 kilos = $9.50 per
kilo.
Direct materials yield variance kilos
1,250 units should use (× (3 + 5) kilos)
10,000
They did use 9,600
Materials yield variance in kilos 400
(F)
Standard weighted average cost per kilo $9.50
Direct materials yield variance in $ $3,800 (F)
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(b)
Summary $
Standard materials cost of 1,250 units (× 76)
95,000
Materials price variance 2,500
(A)
Materials mix variance 2,800
(F)
Materials yield variance 3,800
(F)
Actual materials cost 90,900
40 Planning and operational variances
(a) Operational variances (using the retrospective or ex post standard cost).
Direct labour rate variance $
8,200 hours should cost (× $15)
123,000
They did cost 120,800
Direct labour rate variance 2,200
(F)
Direct labour efficiency variance hours
2,000 units should take (× 4 hours)
8,000
They did take 8,200
Efficiency variance in hours 200
(A)
Standard cost per labour hour $15
Direct labour efficiency variance in $ $3,000
(A)
Planning variance $
Standard cost of 2,000 units:
Original (ex ante) standard (× 3 hours × $15)
90,000
Revised (ex post) standard (× 4 hours × $15)
120,000
Planning variance 30,000
(A)
The planning variance is adverse because the original standard cost was too
optimistic.
Summary $
Original standard cost of 2,000 units 90,000
Planning variance 30,000 (A)
Revised standard cost of 2,000 units 120,000
Operational variances
Direct labour rate 2,200
(F)
Direct labour efficiency 3,000
(A)
Actual direct labour cost 120,800