CMA
Test (Variance)
Question: 1
Safety Products (Pvt) Limited (SPL) is engaged in the manufacturing of safety products for the
construction industry. The following production information, for further analysis, has been provided by
SPL:
Rupees
Per unit Budgeted Cost:
Direct material (10 kg @ Rs. 22 per kg) 220
Direct labour (1.5 hours @ Rs. 110 per hour) 165
Variable overhead (1.5 hours @ Rs. 55 per hour) 82.5
Fixed overhead (1.5 hours @ Rs. 110 per hour) 165
Total per unit budgeted cost 632.5
Budgeted variable overhead 866,250
Budgeted fixed overhead 1,732,500
Fixed and variable overheads are absorbed on the basis of direct labour hours, which are estimated to
be 15,750 hours per month.
Rupees
Actual cost results:
Direct material (100,000 kg) 1,650,000
Direct labour (13,000 hours) 1,573,000
Variable overhead 910,000
Fixed overhead 1,692,900
Total actual cost 5,825,900
Budgeted sales of SPL is 10,500 units at a price of Rs. 1,210 per unit and the actual sales revenue of the
company is Rs. 12,540,000 for 9,500 units.
Required:
a) Calculate the following variances: (1.5 x 08 =12)
i. Sales price variance
ii. Sales volume profit variance
iii. Material price variance
iv. Materials usage variance
v. Labour rate variance
vi. Labour efficiency variance
vii. Variable overhead expenditure variance
viii. Variable overhead efficiency variance
b) Calculate the following fixed overhead variances: (1.5 x 4 = 08)
i. Fixed overhead expenditure variance
ii. Fixed overhead volume variance
iii. Fixed overhead volume efficiency variance
iv. Fixed overhead volume capacity variance
Question:2
Choc Co is a company which manufactures and sell three types of biscuits in packets. One of them is
called ‘Ooze’ and contains three types of sweeteners: honey, sugar and syrup. The standard materials
usage and cost for one unit of ‘Ooze’ (one packet) is as follows:
Honey 20 grams at 0.02 per gram 0.40
Sugar 15 grams at 0.03 per gram 0.45
Syrup 10 grams at 0.025 per gram 0.25
1.10
In the three months ended 30 November 2011, Cho Co produced 101,000 units of ‘Ooze’ using 2,200 kg
of honey, 1,400 kg of sugar and 1,050 kg of syrup.
Note: there are 1,000 grams in a kilogram (kg).
Required:
Calculate the following variance for materials in Ooze:
i. Total materials usage variance. (4 marks)
ii. Total materials mix variance. (4 marks)
iii. Total materials quantity (yield) variance. (4 marks)
Question: 3
Titan Manufacturing Company produces a consumer product. The company prepares its fixed
production budget annually and standard costing for the production budget annually and standard
costing for the production on monthly basis. The budget, the standard production cost and actual data
for the month ended June 30, 2016 are given below:
Budgeted and Standard Cost Data
Budgeted sales and production for the month (Units) 25,000
Standard cost for each unit of product:
Direct material: Beta 15 kgs @ Rs. 2 per kg
Gama 10 kgs @ Rs. 7 per kg
Direct labour incurred 10 hours @ Rs. 4 per hour
Fixed production overhead 200% of direct labour
Budgeted sales price has been calculated to give a profit of 20% on sales price.
Actual Data for the Month
Production (units sold at a price 20% higher than budgeted) 14,500
Direct material consumed: Beta 150,000 kgs @ Rs. 3 per kg
Gama 75,000 kgs @ Rs. 6 per kg
Direct labour incurred 72,000 hours at Rs. 5 per hour
Fixed production overheads incurred (Rs.) 1,800,000
Other information:
Volume efficiency variance (Rs.) 584,000 (F)
Volume capacity variance (Rs.) 1,424,000 (A)
Required:
a) Prepare a statement for month ended June 30, 2016 showing:
i. The standard production cost and selling price per unit. (03)
ii. The actual profit for the period. (03)
b) Determine the variance for:
i. Direct material price and usage. (03)
ii. Direct labour rate and efficiency. (03)
iii. Fixed overhead expenditure and volume. (02)
iv. Sales price and volume. (02)
c) Reconcile the budgeted and actual profit. (04)
Question: 4
Spain Limited uses standard costing system. Below is a summary of variances occurred duringthe month
of February 2022:
Rupees
Favourable variances:
Material price 15,000
Labour efficiency 12,000
Adverse variances:
Fixed overheads expenditure 9,500
Material usage 14,000
Following information is also available:
(i) Standard cost card per unit:
Rupees
Direct material (Rs. 120 per kg) 360
Direct labour (Rs. 100 per hour) 200
Variable factory overheads 175
Fixed factory overheads 150
(ii) 2,520 units were produced during the month.
(iii) Direct material was purchased from a new supplier at a discount of 2% of
standardmaterial cost.
(iv) Actual wages and actual fixed overheads were Rs. 510,000 and Rs. 380,000
respectively.
Required:
Calculate the following:
(a) Actual material purchased (02)
(b) Budgeted units (02)
(c) Actual material used (02)
(d) Actual labour hours (02)
