103692956 acca f2 variances
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Acca F2 VariancesTRANSCRIPT
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ACCA F2 Management Accounting
5 S a l es V ar i an c e s
Example 1:
A company is reviewing actual performance to budget to see where there are differences. The following
standard information is relevant:
$ per unit
Selling price 50
Prime Costs 20
Variable production overheads 11
Fixed production overheads 5
Fixed selling costs 1
Budgeted sales units were 3,000. Actual units sold in the period were 3,500 at a price of $46 per unit.
What was the sales volume variance and sales price variance using marginal costing?
What was the sales volume variance and sales price variance using absorption costing?
What was the sales volume variance and sales price variance using marginal costing?
Sales price variances
ASP x AO 46 x 3,500 = 161,000
~ SSP x AO ~ 50 x 3,500 = 175,000
= 14,000 (A)
Sales contribution volume variances
AO x SC 3,500 x 19 = 66,500
~ BO x SC ~ 3,000 x 19 = 57,000
= 9,500 (F)
Sales variances
AO x AC 3,500 x 15 = 52,500
~ BO x SC ~ 3,000 x 19 = 57,000
= 4,500 (A)
What was the sales volume variance and sales price variance using absorption costing?
Sales price variances
ASP x AO 46 x 3,500 = 161,000
~ SSP x AO ~ 50 x 3,500 = 175,000
= 14,000 (A)
Sales margin volume variances
AO x S Profit 3,500 x 14 = 49,000
~ BO x S Profit ~ 3,000 x 14 = 42,000
= 7,000 (F)
Sales variances
AO x AC 3,500 x 10 = 35,000
~ BO x SC ~ 3,000 x 14 = 42,000
= 7,000 (A)
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ACCA F2 Management Accounting
Standard Costing: Reconciliation of Budgeted Profits and Actual Profits
Example 2:
(a) Standard costing variances
Direct material
Actual usage at actual cost 16,000m x $140 = $22,400
Price $1,600 Fav
Actual usage at standard cost 16,000m x $150 = $24,000
Usage $600 Adv
Standard usage at standard cost 1,300 units x 12m x $150 = $23,400
Direct labour
Actual hours at actual rate 5,000 hrs x $600 = $30,000
Rate $0
Actual hours at standard rate 5,000 hrs x $600 = $30,000
Efficiency $1,200 Fav
Standard hours at standard rate 1,300 units x 4 hrs x $600 = $31,200
Variable overhead
Actual hours at actual rate 5,000 hrs x $1510 = $75,500
Expenditure $500 Adv
Actual hours at standard rate 5,000 hrs x $1500 = $75,000
Efficiency $3,000 Fav
Standard hours at standard rate 1,300 units x 4 hrs x $1500 = $78,000
Fixed overhead
Actual overhead = $54,600
Expenditure $14,600 Adv
Budgeted overhead 1,000 units x 4 hrs x $1000 = $40,000
Capacity $10,000 Fav
Actual hours at standard rate per hour 5,000 hours x $1000 = $50,000
Efficiency $2,000 Fav
Standard overhead for actual production 1,300 units x 4 hrs x $1000 = $52,000
Sales volume
Budgeted sales units at Standard profit margin 1,000 units x $10800 = $108,000
$21,600 Fav
Actual sales units at Standard profit margin 1,200 units x $10800 = $129,600
Sales price
Actual sales at standard price 1,200 units x $250 = $300,000
$12,000 Adv
Actual sales at actual price 1,200 units x $240 = $288,000
(b) Differences between standard absorption and standard marginal costing:
Sales volume variance
This variance measures the effect on profit of selling more (or less) units than budgeted. Under absorption
costing this is calculated at standard profit per unit. Note that in calculating standard profit per unit all costs,
both fixed and variable, are charged against standard selling price. Under standard marginal costing the
variance is calculated at standard contribution per unit. In calculating standard contribution per unit only
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ACCA F2 Management Accounting
standard variable costs are charged against standard selling price.
Fixed overhead variances
The expenditure variance (the difference between actual and budgeted expenditure) is the same under both
approaches.
Under absorption costing fixed overheads are charged to individual units of production via an overhead
absorption rate. If production volume differs from that budgeted this can result in under or over absorption of
overhead and resultant adverse or favourable volume variance. In turn this volume variance can be subdivided
into capacity and efficiency variances.
Under marginal costing, fixed overheads are not charged to individual units of production and thus no under or
over absorption, or volume variance, occurs.
Stock valuation and its effect upon profit
The profit figures under the two systems may be different due to the different costing principles involved. Under
absorption costing finished goods stock is valued at full production cost, which includes both fixed and variable
production cost. Under a marginal costing system finished goods stock is valued at variable production cost only.
This will result in differences in stock valuations and possibly differences in cost of sales figures. In a period
when production is greater than sales (as in the most recent month) absorption costing will show the higher
profit figure as a proportion of the current periods fixed production costs will be absorbed into units included in
closing stock and be carried forward into the next period. This will result in absorption costing showing a lower
cost of sales and a higher profit than marginal costing.
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ACCA F2 Management Accounting
Question 3:
(i) Budgeted sales and production units
Budgeted profit = BO x Standard profit
56,700 = BO x 2.10
BO = 56,700 2.10
= 27,000 units
(ii) Actual sales and production units
FOH volume variance = (AO BO) FOH/u
2,088 = (AO 27,000) 2.40
AO = 27,000 + 2,088/ 2.40
Actual production units = 27,870 units
Sales volume variance = (AO BO) Standard profit/ u
2,646 = (AO 27,000) 2.10
AO = 27,000 + 2,646/ 2.10
Actual sales units = 28,260 units
(iii) Actual selling price
Sales price variance = (Actual SP Standard SP) AO
(1,413) = (Actual SP 7.70) 28,260
Actual SP = 7.70 - 1,413/ 28,260
= $7.75
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ACCA F2 Management Accounting
Question 4:
Direct materials usage variance
AQ x SP = 106,075
~ SQ x AO x SP ~ 8 x 2,700 x 5 = 108,000
= 1,925 (F)
Direct materials price variance (purchases)
AP x AQ = 118,488
~ SP x AQ ~ 5 x 19,748 = 98,740
= 19,748 (A)
Direct labour rate variance
AR x AHr = 101,520
~ SR x AHr ~ 7 x 14,100 = 98,700
= 2,820 (A)
Direct labour efficiency variance
AHr x SR = 98,700
~ SHr x AO x SR ~ 5 x 2,700 x 7 = 94,500
= 4,200 (A)
Fixed overhead expenditure variance
AFOH = 72,490
~ BFOH ~ 25 x 2,600 = 65,000
= 7,490 (A)
Fixed overhead volume variance
AO x FOAR/u 2,700 x 25 = 67,500
~ BO x FOAR/u ~ = 65,000
= 2,500 (F)
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ACCA F2 Management Accounting
Question 5:
(a) Calculate the standard cost of a single metal container.
Material A (6 x 5.00) 30.00
Labour (2 x 4.50) 9.00
Variable overheads (2 x 7.50) 15.00
Fixed overheads (2 x 12.00) 24.00
78.00
(b) Cost variances for May 2000;
Direct materials price variance
AP x AQ = 18,290
~ SP x AQ ~ 5 x 3,550 = 17,750
= 540 (A)
Direct materials usage variance
AQ x SP 3,550 x 5 = 17,750
~ SQ x AO x SP ~ 6 x 600 x 5 = 18,000
= 250 (F)
Direct labour rate variance
AR x AHr = 5,610
~ SR x AHr ~ 4.50 x 1,320 = 5,940
= 330 (F)
Direct labour efficiency variance
AHr x SR = 5,940
~ SHr x AO x SR ~ 2 x 600 x 4.50 = 5,400
= 540 (A)
Variable overhead expenditure variance
AVOH = 9,400
~ VOAR x Ahr ~ 7.50 x 1,320 = 9,900
= 500 (F)
Variable overhead efficiency variance
Ahr x VOAR = 9,900
~ Shr x AO x VOAR ~ 2 x 600 x 7.50 = 9,000
= 900 (A)
Fixed overhead expenditure variance
AFOH = 15,610
~ BFOH ~ = 15,000
= 610 (A)
Fixed overhead volume variance
Shr x AO x FOAR 2 x 600 x 12 = 14,400
~ Bhr x FOAR ~ 15,000/12 x 12 = 15,000
= 600 (F)
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ACCA F2 Management Accounting
Question 6:
(a) Operating statement
Budgeted Profit (10,000 x 8) 80,000
Sales margin volume variance (9,500 10,000) 8 4,000 A
Standard Profit for AO (9,500 x 8) 76,000
Adjustments:
Sales price variance 588,500 60 x 9,500 18,500 F
Material price variance 120,000 3 x 37,000 9,000 A
Material usage variance (37,000 4 x 9,500) 3 3,000 F
Labour rate variance 200,000 4 x 49,000 4,000 A
Labour efficiency variance (49,000 5 x 9,500) 4 6,000 A
VOH expenditure variance 47,000 5 x 9,500 500 F
FOH expenditure variance 145,000 3 x 5 x 10,000 5,000 F
FOH efficiency variance (49,000 5 x 9,500) 3 4,500 A
FOH capacity variance (49,000 50,000) 3 3,000 A
Net variances 500 F
Actual Profit 76,500
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ACCA F2 Management Accounting
Short Questions
Q1: Direct materials usage variance
AQ x SP 3,850 x 5.00 = 19,250
~ SQ x AO x SP ~ 2 x 2,000 x 5.00 = 20,000
= 750 (F)
Direct materials price variance (production)
AP x AQ = 22,715
~ SP x AQ ~ 5.00 x 3,850 = 19,250
= 3,465 (A)
Direct materials cost variance
AP x AQ 22,715
~ SQ x AO x SP ~ 2 x 2,000 x 5.00 = 20,000
2,715 (A)
Q2: Direct materials price variance (production)
AP x AQ = 16,000
~ SP x AQ ~ 3.00 x 5,000 = 15,000
= 1,000 (A)
Direct materials usage variance
AQ x SP 5,000 x 3.00 = 15,000
~ SQ x AO x SP ~ 4 x 1,270 x 3 = 15,240
= 240 (F)
Direct materials cost variance
AP x AQ 16,000
~ SQ x AO x SP ~ 4 x 1,270 x 3 = 15,240
760 (A)
Q3: Direct materials price variance (production)
AP x AQ = 136,000
~ SP x AQ ~ 2.50 x 53,000 = 132,500
= 3,500 (A)
Direct materials usage variance
AQ x SP 53,000 x 2.50 = 132,500
~ SQ x AO x SP ~ 2 x 27,000 x 2.50 = 135,000
= 2,500 (F)
Direct materials cost variance
AP x AQ 136,000
~ SQ x AO x SP ~ 2 x 27,000 x 2.50 = 135,000
1,000 (A)
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ACCA F2 Management Accounting
Q4: Direct materials price variance (production)
AP x AQ 2.60 x 12,000 = 31,200
~ SP x AQ ~ 2.50 x 12,000 = 30,000
= 1,200 (A)
Direct materials usage variance
AQ x SP 12,000 x 2.50 = 30,000
~ SQ x AO x SP ~ 10.5 x AO x 2.50 = 31,815
= 1,815 (F)
AO = 1,212
Direct materials cost variance
AP x AQ 2.60 x 12,000 = 31,200
~ SQ x AO x SP ~ 10.5 x 1,212 x 2.50 = 31,815
615 (F)
Q5: Direct materials cost variance
AP x AQ 42,912
~ SQ x AO x SP ~ 42,000/ 7,000 x 7,200 = 43,200
288 (F)
Answer: A
Q6: Direct labour rate variance
AR x AHr = 64,150
~ SR x AHr ~ 6.40 x 11,700 = 74,880
= 10,730 (F)
Direct labour efficiency variance
AHr x SR 11,700 x 6.40 = 74,880
~ SHr x AO x SR ~ 4.5 x 2,300 x 6.40 = 66,240
= 8,640 (A)
Direct labour cost variance
AR x AHr 64,150
~ SR x Shr x AO ~ = 66,240
2,090 (F)
Q7: Direct labour cost variance
AR x AHr 136,500
~ SR x Shr x AO ~ 1.60 x 2 x 38,000 = 121,600
14,900 (A)
Direct labour rate variance
AR x AHr = 136,500
~ SR x AHr ~ 1.60 x 78,000 = 124,800
= 11,700 (A)
Direct labour efficiency variance
AHr x SR 78,000 x 1.60 = 124,800
~ SHr x AO x SR ~ 2 x 38,000 x 1.60 = 121,600
= 3,200 (A)
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ACCA F2 Management Accounting
Q8: Direct labour efficiency variance
AHr x SR (11 x 30 x 4) x 11.38/0.5 = 30,043.20
~ SHr x AO x SR ~ 0.5 x 2,850 x 11.38/0.5 = 32,433.00
= 2,389.80 (F)
Answer: C
Q9: Direct labour rate variance
AR x AHr = 62,579.60
~ SR x AHr ~ 21.96/2.4 x 6,760 = 61,854.00
= 743.60 (A)
Q10: Variable overhead expenditure variance
AVOH = 12,400
~ VOAR x AHr ~ = 12,720
= 320 (F)
Variable overhead efficiency variance
AHr x VOAR = 12,720
~ SHr x AO x VOAR ~ = 13,515
= 795 (F)
Variable overhead cost variance
AVOH 12,400
~ VOAR x Shr x AO ~ = 13,515
1,115 (F)
Q11: Variable overhead expenditure variance
AVOH = 8,330
~ VOAR x AHr ~ 0.60 x 8,640 = 5,184
= 3,146 (A)
Variable overhead efficiency variance
AHr x VOAR = 5,184
~ SHr x AO x VOAR ~ 2 x 4,800 x 0.60 = 5,760
= 576 (F)
Variable overhead cost variance
AVOH 8,330
~ VOAR x Shr x AO ~ = 5,760
2,570 (A)
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ACCA F2 Management Accounting
Q12: Variable overhead expenditure variance
A: AVOH = 23,520
~ VOAR x AHr ~ 2 x 9,800 = 19,600
= 3,920 (A)
B: AVOH = 7,800
~ VOAR x AHr ~ 1.50 x 6,500 = 9,750
= 1,950 (F)
Total 1,970 (A)
Variable overhead efficiency variance
A: AHr x VOAR = 19,600
~ SHr x AO x VOAR ~ 20 x 500 x 2.00 = 20,000
= 400 (F)
B: AHr x VOAR = 9,750
~ SHr x AO x VOAR ~ 12 x 500 x 1.50 = 9,000
= 750 (A)
Total 350 (A)
Variable overhead cost variance
A: AVOH 23,520
~ VOAR x Shr x AO ~ = 20,000
3,520 (A)
B: AVOH = 7,800
~ VOAR x Shr x AO ~ = 9,000
= 1,200 (F)
Total 2,320 (A)
Q13: Fixed overhead expenditure variance
AFOH = 37,200
~ BFOH ~ 2,000 x 3 x 6 = 36,000
= 1,200 (A)
Q14: Fixed overhead volume variance
SHr for AO x FOAR 3 x 2,200 x 6 = 39,600
~ BHr x FOAR ~ = 36,000
= 3,600 (F)
Fixed overhead cost variance
AFOH = 37,200
~ FOAR x SHr x AO ~ 6 x 3 x 2,200 = 39,600
= 2,400 (F)
Q15: Fixed overhead volume variance
AO x FOAR/ u AO x 20 = 12,000
~ BO x FOAR/ u ~ 600 x 20 = 12,000
FOH Capacity variance + FOH Efficiency variance = -
AO = 600 units
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ACCA F2 Management Accounting
Q16: Fixed overhead volume variance
AO x FOAR/ u 19,500 x 5 = 97,500
~ BO x FOAR/ u ~ 20,000 x 5 = 100,000
FOH Capacity variance + FOH Efficiency variance = 2,500 (F)
Q17: Fixed overhead expenditure variance
AFOH = 396,000
~ BFOH ~ 36,000/10 x 100 = 360,000
= 36,000 (A)
Actual expenditure on fixed overheads are: $36,000
Q18: What fixed cost variance is measured by the following formula?
(Budgeted fixed overheads actual fixed overheads incurred)
A Expenditure B Capacity C Efficiency D Volume
Answers for short questions
19 A 23 C 27 D 31 B
20 C 24 D 28 C
21 B 25 B 29 D
22 D 26 C 30 C