- This is the difference between the standard direct material cost of the actual production volume and the actual cost of direct material. This is the sum of material price variance and material usage variance.
(a) Material price variance
This is the difference between the standard price and actual purchase price for the actual quantity of material. It can be calculated at the time of purchase or the time of usage. Generally, the former is preferable. It is calculated as under:-
Actual x Actual quantity – (Standard price x Actual quantity)
- The main causes of this variance are:-
i) Rise or fall in prices.
ii) Buying inferior or superior quality instead of planned quality.
iii) The effects of quality discounts due to buying smaller or larger quantities instead of planned quantities.
(b) Material usage variance
- This is the difference between the standard quantity specified for the actual production and the actual quantity used, at standard purchase price. It is calculated as under:-
Standard price (Actual quantity – Standard quantity)
- The main causes of this variance are:-
(i) Greater or lower yield as compared to standard or expected yield.
(ii) Greater or lower quantity of scrap as compared to anticipated quantity.
(iii) The use of inferior or superior quality of material.
Wilfykil answered the question on August 6, 2019 at 11:27
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The following data relates to three products XYZ
(Solved)
The following data relates to three products XYZ
Required:
Calculate profit made by each product apportioning joint costs on;
i) Sales value bases
ii) Physical unit bases
Date posted:
August 6, 2019
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Answers (1)
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Using the data given below, show process 1 account where normal loss has a scrap value of sh1.8 per kilo.
(Solved)
Using the data given below, show process 1 account where normal loss has a scrap value of sh1.8 per kilo.
In the manufacture of product vitality 2000 kgs of material at kshs 5kg were supplied to process 1. Labour cost amounted to sh 3,000 and production overheads sh 2,300, normal loss has been estimated at 10% . The actual product after process was 1750kg.
Date posted:
August 6, 2019
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Answers (1)
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HZ Construction Company acquired a contact for the construction of a dual carriage way from Nairobi at cost of 200 million.
(Solved)
HZ Construction Company acquired a contact for the construction of a dual carriage way from Nairobi at cost of 200 million. The data relating to the contract for year ended 31st December 2009 was as follows:
The company had received from the client payment amounting to 126 million.
Required:
(i) Contract account
(ii) Contractee account
(iii) Balance sheets extract showing work in progress.
Date posted:
August 6, 2019
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Answers (1)
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A company manufactures products L and M using the same equipment and similar processes. An extract of the production data for these products in one...
(Solved)
A company manufactures products L and M using the same equipment and similar processes. An extract of the production data for these products in one period is as follows.
Required:
Calculate the production overhead to be absorbed by one of each other product using the following costing methods.
(a) A traditional costing approach using direct labour hour rate to absorb overheat.
(b) An activity based costing approach using suitable cost drivers to trace overheads to products.
Date posted:
August 6, 2019
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Answers (1)
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The following information was extracted from the books of Danex Holdings regarding its stocks:
(Solved)
The following information was extracted from the books of Danex Holdings regarding its stocks:
Determine the following stock levels for Danex Holdings:
i. Re-order level
ii. Maximum stock level
iii. Minimum stock level
Date posted:
April 17, 2019
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Answers (1)
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Outline the factors Affecting Stock Levels
(Solved)
Outline the factors Affecting Stock Levels
Date posted:
April 17, 2019
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Answers (1)
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A company has an annual demand for material “p” of 25,000 tons per annum. The cost price per ton is Ksh2, 000 and stock holding...
(Solved)
A company has an annual demand for material “p” of 25,000 tons per annum. The cost price per ton is Ksh2, 000 and stock holding is 25% per annum of the stock value. Delivery cost per batch is Ksh400.
Calculate the Economic Order Quantity(E.O.Q)
Date posted:
April 17, 2019
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Answers (1)
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Give objectives of Stock Control.
(Solved)
Give objectives of Stock Control.
Date posted:
April 17, 2019
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Answers (1)
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Explain First In First Out (FIFO) as a method of Valuing Material Issues
(Solved)
Explain First In First Out (FIFO) as a method of Valuing Material Issues
Date posted:
April 17, 2019
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Answers (1)
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Name and explain types of Stores
(Solved)
Name and explain types of Stores
Date posted:
April 17, 2019
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Answers (1)
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List the features of Effective and Good Store keeping
(Solved)
List the features of Effective and Good Store keeping
Date posted:
April 17, 2019
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Answers (1)
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The production manager of Kemu ltd Company, is concerned abut the apparent fluctuation in efficiency and wants to determine how labour costs (in Sh.) are...
(Solved)
The production manager of Kemu ltd Company, is concerned abut the apparent fluctuation in efficiency and wants to determine how labour costs (in Sh.) are related to volume. The following data presents results of the 12 most recent weeks.
Required:
Estimate the cost function using:
a) The high low method
b) Regression analysis
Assume that the Company intends to produce 45 units, 34 units next period
Estimate the labour cost to be incurred.
c) Assume that the company (in illustration 2.1) intends to spend Sh.400 on labour cost next period. Compute the number of units that the company may produce.
Date posted:
April 17, 2019
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Answers (1)
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Based on performance, you have been provided with the following information regarding ABC Ltd for the year ended 31 December 2004 :
(Solved)
Based on performance, you have been provided with the following information regarding ABC Ltd for the year ended 31 December 2004 :
Required:
Develop a total cost function based on the above data using the high-low method.
Date posted:
April 17, 2019
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Answers (1)
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What are the advantages and disadvantages of cost estimation?
(Solved)
What are the advantages and disadvantages of cost estimation?
Date posted:
April 17, 2019
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Answers (1)
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What is the role of a cost accounting department in an organization?
(Solved)
What is the role of a cost accounting department in an organization?
Date posted:
April 17, 2019
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Answers (1)
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The following information for the year ended December 31, 2005 is obtained from the books and records of a factory.
(Solved)
The following information for the year ended December 31, 2005 is obtained from the books and records of a factory.
Factory overhead is 80% of wages and administration overhead 25% of factory cost. The value of the jobs during 2005 was Kshs. 410,000
Prepare:
(i) Consolidated completed jobs account showing the profit made or loss incurred on the jobs.
(ii) Consolidated work – in – progress account.
Date posted:
April 16, 2019
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Answers (1)
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As newly appointed cost accounting, you find that the selling price of job No. 5 has been calculated on the following basis:
(Solved)
As newly appointed cost accounting, you find that the selling price of job No. 5 has been calculated on the following basis:
You are required to:
Wage rate: A = Shs. 4 per hour, B = Shs. 6 per hour, C = Shs. 4 per hour.
(a) Draw up a job cost sheet
(b) Calculate and enter the revised costs using the previous year’s figures as a basis (c) Add to the total job cost 10% for profit and give the final selling price.
Date posted:
April 16, 2019
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Answers (1)
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The information given below has been taken from the cost records of a factory in respect of job no. 707.
(Solved)
The information given below has been taken from the cost records of a factory in respect of job no. 707.
Fixed expenses estimated at Kshs. 20,000 for 10,000 working hours. Calculate the cost of the job No. 707 and the price for the job to give a profit of 25% on the selling price.
Date posted:
April 16, 2019
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Answers (1)
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The following figures are extracted from the Trial Balance of AB. Co. on 31st Sep, 2005.
(Solved)
The following figures are extracted from the Trial Balance of AB. Co. on 31st Sep, 2005.
REQUIRED
Prepare
i) A statement of cost showing various elements of cost.
ii) A statement of profit.
Date posted:
April 16, 2019
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Answers (1)
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The following extract of costing information relates to commodity ‘A’ for the half year ending 31st Dec. 2005.
(Solved)
The following extract of costing information relates to commodity ‘A’ for the half year ending 31st Dec. 2005.
Selling and distribution overheads are Sh. 1 per ton sold. 16000 tons of commodity were produced during the period:
Required:
You are to ascertain
(i) Cost of raw materials used
(ii) Cost of output for the period
(iii) Cost of sales
(iv) net profit for the period
(v) Net profit per ton of the commodity.
Date posted:
April 16, 2019
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Answers (1)