Grüning additional Exercises (KLAUSUR!!!) Flashcards
How do you calculate standard cost per unit in variance analysis?
(Total Direct Material Cost + Total Direct Labour Costs + Total production overhead [variable + fixed]) / units
Calculate Material price variance
(standard/budgeted price – actual price) x actual quantity
Calculate Material quantity variance
(standard quantity – actual quantity) x standard price
Calculate Total direct material variance
- standard costs – actual costs
* material price variance + material quantity variance
Calculate Wage rate variance
(standard/budget rate – actual rate) x actual hours
Calculate Labour rate efficiency Variance
(standard/budget hours – actual hours) x standard/budget rate
Calculate Total Labour Variance
- standard costs – actual costs
* wage rate variance + labour efficiency variance
Calculate Variable overhead expenditure variance
(actual hour x standard/budget rate) – actual cost
budget rate= Production overhead / (budget production volume * budget hrs per unit)
Calculate Variable overhead efficiency variance
(standard/budget hours – actual hours) · standard/budget rate
budget rate= Production overhead / (budget production volume * budget hrs per unit)
Calculate Total variable overhead variance
- standard/budget costs – actual costs
* variable overhead expenditure variance + variable overhead efficiency variance
Calculate Fixed overhead expenditure variance
• budgeted fixed overhead – actual fixed overhead
Calculate Total sales margin variance
(actual contribution – budgeted contribution)
Calculate Sales margin price variance
(actual price – standard/budget price) x actual volume
Calculate sales margin volume variance
(actual sales volume – budgeted sales volume) · standard/budgeted unit contribution margin
Calculate Cost per Unit Output acc. to process costing
Total Cost for the period / Output of the period
Total Costs = (Total direct costs + total indirect costs [overhead x % of the product to other products] - scrap value of normal losses)
Calculate Cost of abnormal losses for process X
Actual Output - Budgeted Output - normal loss = amount of abnormal loss
Cost of normal loss = Amount of abnormal loss x Cost per Output
Calculate the cost per unit for each product using conventional methods
Cost per Unit = (direct labour * time per unit) + direct materials + (overhead total * multiplicator)
Calculate the cost per unit for each product using ABC principles
- Calculate the overhead assignes to cost pools
a. total all overheads assigned to all products in EUR
b. multiply total from a by % of cost pool (e.g. 35% for set-up costs) - calculate cost driver rates
a. divide total cost per cost driver with amount of cost driver in total (e.g. 300.000€/500 set-ups=600€/set-up) - assign overhead costs to each product
a. multiply cost per cost driver by amount assigned to one product (600€/set-up x 200 set-ups for product X = 120.000€ for product X) - calculate overhead per product
a. divide total overhead per product by product output (e.g. 120.000€ setup overhead for product X / 1.200 output of product x = 100 €/setup per product X)
Comment on the reasons for any differences in the costs in your answers to traditional costing and process costing.
The traditional method allocates overheads in proportion to machine hours to products (4.8% to X, 5.3% to Y and 89.9% to Z). However, when overheads are assigned on the basis of number of set-ups, movements of materials and inspections the proportion of overheads assigned to product Z are 72% (480/670) for set-up costs, 72% (87/120) for materials handling costs and 67% (670/1,000) for inspection costs. In contrast, the traditional method allocates approximately 90% of all costs to product Z. Therefore the unit cost for product is higher with the traditional method. The opposite situation applies with products X and Y and, as a result, unit costs are lower with the traditional method.
Explain the possible causes of the material usage variance
Common causes of material usage variances include the careless handling of materials by production personnel, the purchase of inferior quality materials, pilferage, changes in quality control requirements, or changes in methods of production
Explain the possible causes of the labour rate variance
Reasons might include the use of inferior materials, different grades of labour, failure to maintain machinery in proper condition, the introduction of new equipment or tools and changes in the production processes
Explain the possible cuases for differences of the sales margin volume variance
The sales margin volume variance is difficult to interpret as changes in sales volume might be induced by changes in sales price. A further problem is that the variance may arise from external factors and may not be controllable by the management. For example, a reduction in sales volume may be the result of an economic recession that was not foreseen when the budget was prepared
Explain the meaning and relevance of interdependence of variances when reporting to managers
Interdependence occurs when an event has a favourable impact on one variance but an adverse impact on another variance. For example, the purchase of inferior quality materials may account for a favourable material price variance but it may also have a negative impact on the material usage and labour efficiency variances due to the poorer quality causing an increase in usage
Explain what reconciliation means in a variance analysis context!
Once all variances have been calculated, a statement can be prepared to reconcile actual profit to budgeted profit. In the reconciliation the sum of all variances (considering whether favourable or unfavourable) is equal to the difference between actual and budgeted profit
Admin overhead expenditure variance
Budgeted admin cost – Actual admin cost
