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ACCA · Question 37 · Standard Costing
Section B - Multi-Task Question 2 (Standard Costing)
Scenario: AeroDrone Manufacturing produces specialized drones. The standard cost card for one drone is:
- Materials: 2 kg of carbon fiber at $50 per kg
- Labor: 4 hours at $25 per hour
- Fixed Overhead: Absorbed at $10 per labor hour
Budgeted production was 1,000 drones.
Actual results for the period:
- Drones produced: 1,100
- Materials purchased and used: 2,300 kg costing $110,400
- Labor worked: 4,200 hours costing $109,200
- Fixed overheads incurred: $42,000
This MTQ contains 5 sub-tasks worth 2 marks each.
Task 1: Calculate the Material Price Variance.
Task 2: Calculate the Material Usage Variance.
Task 3: Calculate the Labor Rate Variance.
Task 4: Calculate the Labor Efficiency Variance.
Task 5: Calculate the Fixed Overhead Expenditure Variance.
Section B - Multi-Task Question 2 (Standard Costing)
Scenario: AeroDrone Manufacturing produces specialized drones. The standard cost card for one drone is:
- Materials: 2 kg of carbon fiber at $50 per kg
- Labor: 4 hours at $25 per hour
- Fixed Overhead: Absorbed at $10 per labor hour
Budgeted production was 1,000 drones.
Actual results for the period:
- Drones produced: 1,100
- Materials purchased and used: 2,300 kg costing $110,400
- Labor worked: 4,200 hours costing $109,200
- Fixed overheads incurred: $42,000
This MTQ contains 5 sub-tasks worth 2 marks each.
Task 1: Calculate the Material Price Variance.
Task 2: Calculate the Material Usage Variance.
Task 3: Calculate the Labor Rate Variance.
Task 4: Calculate the Labor Efficiency Variance.
Task 5: Calculate the Fixed Overhead Expenditure Variance.
How to approach this question
Use standard variance formulas. Price = (SP - AP) * AQ. Usage = (SQ - AQ) * SP. Rate = (SR - AR) * AH. Efficiency = (SH - AH) * SR. Fixed OH Exp = Budgeted OH - Actual OH.
Full Answer
Task 1: Standard cost of actual materials = 2,300 kg * $50 = $115,000. Actual cost = $110,400. Variance = $4,600 Favorable.
Task 2: Standard quantity for 1,100 drones = 2,200 kg. Actual quantity = 2,300 kg. Difference = 100 kg Adverse. 100 kg * $50 = $5,000 Adverse.
Task 3: Standard cost of actual hours = 4,200 * $25 = $105,000. Actual cost = $109,200. Variance = $4,200 Adverse.
Task 4: Standard hours for 1,100 drones = 4,400 hours. Actual hours = 4,200 hours. Difference = 200 hours Favorable. 200 hours * $25 = $5,000 Favorable.
Task 5: Budgeted Fixed OH = 1,000 drones * 4 hours * $10 = $40,000. Actual Fixed OH = $42,000. Variance = $2,000 Adverse.
Common mistakes
Using budgeted production (1,000) instead of actual production (1,100) to find standard quantities and hours.
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