E Standard costing

Written by Mahnoor Sheikh (ACCA)

ACCA · Management Accounting · 10 questions

Name: ____________________ Date: ____________

A unit uses 2 kg of material at a standard price of $5 a kg. 1,000 units were made. 2,100 kg were bought and used at $4.80 a kg. What is the material price variance?
- A $500 favourable
- B $500 adverse
- C $420 favourable
- D $420 adverse
A unit uses 2 kg of material at a standard price of $5 a kg. 1,000 units were made and 2,100 kg were used. What is the material usage variance?
- A $500 adverse
- B $500 favourable
- C $420 adverse
- D $80 adverse
A unit has a standard labour time of 3 hours at $10 an hour. 1,000 units took 3,100 hours at a cost of $10.30 an hour. What is the labour rate variance?
- A $930 favourable
- B $1,000 adverse
- C $300 adverse
- D $930 adverse
A unit has a standard labour time of 3 hours at $10 an hour. 1,000 units took 3,100 hours. What is the labour efficiency variance?
- A $930 adverse
- B $1,000 adverse
- C $1,000 favourable
- D $100 adverse
1,000 units were sold at $52 against a standard selling price of $50. What is the sales price variance?
- A $2,000 favourable
- B $1,000 favourable
- C $2,000 adverse
- D $52,000 favourable
Budgeted sales were 1,000 units and actual sales were 1,100. The standard profit is $8 a unit. What is the sales volume variance?
- A $8,800 favourable
- B $800 favourable
- C $800 adverse
- D $100 favourable
Budgeted fixed overheads were $50,000 and actual fixed overheads were $52,500. What is the fixed overhead expenditure variance?
- A $52,500 adverse
- B $50,000 favourable
- C $2,500 adverse
- D $2,500 favourable
Cheaper, lower grade materials are bought. Which variances are most likely?
- A Adverse price and usage variances
- B A favourable price variance and an adverse usage variance
- C An adverse price variance and a favourable usage variance
- D Favourable price and usage variances
Budgeted profit is $40,000. Favourable variances total $3,000 and adverse variances total $5,000. What is the actual profit?
- A $42,000
- B $32,000
- C $48,000
- D $38,000
Which of these is a factor to consider before investigating a variance?
- A Whether the cost of investigating is less than the likely benefit
- B Whether the variance is favourable
- C The size of the standard cost card
- D The number of workers in the factory

Answer key

1. C, 2. A, 3. D, 4. B, 5. A, 6. B, 7. C, 8. B, 9. D, 10. A

(5.00 - 4.80) x 2,100 = $420, favourable because the actual price is lower.
(2,000 - 2,100) x $5 = $500 adverse.
(10.00 - 10.30) x 3,100 = $930 adverse.
(3,000 - 3,100) x $10 = $1,000 adverse.
(52 - 50) x 1,000 = $2,000, favourable.
(1,100 - 1,000) x $8.
Actual is higher than budget, so it is adverse.
Lower quality can lead to more waste, which is a trade-off between the variances.
40,000 + 3,000 - 5,000.
Investigation is worthwhile only when the benefit is expected to exceed its cost.