Standard Costing Sample Problems

STANDARD COSTING Sample Problems PROBLEM A:

The GR plant of Johnny Blaze Corporation’s Motor Division produces a major subassembly of motor that are specific for 300cc motorbikes. The plant uses the standard costing system for production costing and control. The standard cost sheet for the subassembly are as follows:

Direct Materials (7 lbs. @ P6.00) Direct Labor (2 hrs. @ P12.00) Variable Overhead (2 hrs. @ P10.00) Fixed Overhead (2 hrs. @ P6.00) Total Standard Cost per Unit

42.00 24.00 20.00 12.00 98.00

During the year, the GR plant produced a total pf 70,000 units. 465,000 pounds of materials were purchased at P5.80 per pound. There were 26,400 pounds of materials in the beginning inventory, which is carried at P6 per pound. There was no ending inventory. The company used 150,000 direct labors at a total cost of P1,950,000. Actual fixed overhead totaled P913,000 and actual variable overhead totaled P1,470,000. The GR plant’s practical activity is 75,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labor hours. Requirements: Solve for Johnny Blaze Corporation’s:

a. Materials Price Variance. P93,000 Favorable b. Materials Usage Variance. P8,400 Unfavorable Unfavorable c. Labor Rate Variance. P150,000 Unfavorable

d. Labor Efficiency Variance. P120,000 Unfavorable e. Variable Overhead Spending Variance. P30,000 Favorable f.

Variable Overhead Efficiency Variance. P100,000 Unfavorable

Unfavorable g. Fixed Overhead Spending Variance. P13,000 Unfavorable Unfavorable h. Fixed Overhead Volume Variance. P60,000 Unfavorable

PROBLEM B:

Beginning the year 2017, Harry Company operated to manufacture one particular chemical product, the Felix Felicis. The process of making the Felix Felicis is a long and tedious process, so Harry decided to adapt the standard costing system. Its standard cost sheet presented the following information with regard to the creation of one unit of the said potion: Direct Materials (6 lbs. @ P6.40) Direct Labor (1.8 hrs. @ P18.00 Fixed Overhead (1.8 hrs. @ P8.00) Variable Overhead (1.8 hrs. @ P1.50) Total Standard Cost per Unit

38.40 32.40 14.40 2.70 87.90

In addition, Harry noted that it computes overhead rates using the operations practical volume, which is at 288,000 units. The following are the actual results of operations during the year: Units produced Materials purchased Materials used Direct labor Fixed overhead Variable overhead

280,000 1,684,700 lbs. @ P6.60 1,684,000 515,000 hrs. @ P18.10 4,140,200 872,000

Requirements: Solve for Harry Company’s:

a. Materials Price Variance. P336,940 Unfavorable b. Materials Quantity Variance. P25,600 Unfavorable c. Labor Rate Variance. P51,500 Unfavorable d. Labor Efficiency Variance. P198,000 Unfavorable e. Variable Overhead Spending Variance. P99,500 Unfavorable f.

Variable Overhead Efficiency Variance. P16,500 Unfavorable

g. Fixed Overhead Spending Variance. P7,000 Favorable h. Fixed Overhead Volume Variance. P115,200 Unfavorable

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