How often Standard costing and variance analysis is asked

Where it was asked

• Oct/Nov 201420 marks
• Oct/Nov 201315 marks
• May/Jun 201310 marks

The questions

1. Oct/Nov 2014, Q5A(a)(i)4 marks

   Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. For Poli Limited, using the budgeted material cost of R160 000 for 20 000 units per month (4 kg per unit at a standard cost of R2 per kg) and the actual results of R200 000 spent on 90 000 kg of material used to produce 24 000 units, calculate the material purchase price variance.

2. Oct/Nov 2014, Q5A(a)(ii)4 marks

   Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. Still using Poli Limited's budgeted figures (20 000 units per month, 4 kg per unit, standard cost R2 per kg) and actual figures (24 000 units produced, 90 000 kg of material used, actual material cost R200 000), calculate the material quantity variance.

3. Oct/Nov 2014, Q5A(a)(iii)2 marks

   Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. Based on the material purchase price variance and material quantity variance already calculated for Poli Limited, determine the total material variance for the month.

4. Oct/Nov 2014, Q5A(b)2 marks

   Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. With reference to Poli Limited's use of a standard costing system, state two ways in which a standard costing system can improve cost control.

5. Oct/Nov 2014, Q5A(c)2 marks

   Question 5 is split into two independent parts, both of which had to be answered. Part A concerns Poli Limited, which budgeted a material cost of R160 000 for producing 20 000 units per month, with each unit designed to use 4 kg of material at a standard cost of R2 per kg. During the month, the actual material cost was R200 000 for 24 000 units produced, using 90 000 kg of material in total. Part B concerns ABC Limited's results for February 2014. Budgeted figures were: selling price per unit R500; variable manufacturing overheads that vary with labour hours worked R75 000; labour hours 1 500; and units produced 2 000. The actual results for February were: sales of 2 300 units for R1 104 000; variable manufacturing overheads that vary with hours worked of R73 000; and 1 520 labour hours worked. All units produced during the month were sold, and there was no opening or closing inventory. Give two reasons why organisations, such as Poli Limited, choose to use a standard costing system.