Question

Q 22

The following data relates to actual output, actual costs and variances for the four-weekly accounting period number 4 of a company from Bole which makes only one product.

The value of work in progress at the end of period 4 was the same as the value of work -in - progress at the beginning of the month

Actual production of product XY 18,000 units

Actual costs incurred GHS'000

Direct materials purchased and used (150,000 kg) 210

Direct labour cost (32,000 hours) 136

Variable production overhead 38

Variances GHS'000

Direct materials price 15 Favourable

Direct materials usage 9 Adverse

Direct labour rate 8 adverse

Direct labour efficiency 16 Favourable

Variable production overhead expenditure 6 Adverse

Variable production overhead efficiency 4 Favourable

Variable production overhead varies with labour hours worked

A standard marginal costing system is operated.

Required

Present a standard product cost sheet for one unit of product XY, showing how the standard marginal production cost the product is made up.

Answer 1

Standard Cost Sheet
Direct Material (8 x 1.5)	12.00
Direct Labor (2 x 4)	8.00
Overhead ( 2 x 1)	2.00
Total Cost	22.00

Working Note

Direct materials price variance = (AP - SP) Actual quantity

-15,000 = 210,000 - 150,000SP

150,000SP = 225,000

SP = 225,000/150,000

=1.5

Direct Materials quantity Variance = (AQ - SQ)SP

9,000 = (150,000 - SQ)1.5

9,000 = 225,000 - 1.5 SQ

SQ = 216,000/1.5

SQ = 144,000

Standard quantity per unit = 144,000/18,000 = 8 Kg

Direct labour rate variance = (AR - SR)Actual Hours

8,000 = 136,000 - 32,000SR

SR = 128,000/32,000

SR = 4

Direct labour efficiency variance = (Actual Hours - Standard Hours)SR

-16,000 =(32,000 - SH)4

-16,000 = 128,000 - 4SH

SH = 144,000/4

=36,000 Hours

Standard Hours per unit = 36,000/18,000 = 2

Variable production overhead expenditure variance = Actual expenditure - Budgeted Expenditure

Budgeted Expenditure = 38,000 - 6,000 = 32,000

Variable production overhead efficiency variance = 4,000

Standard Expenditure = 32,000 + 4,000 = 36,000

Standard VOH per unit = 36,000/18,000 = 2