MAF 551 PAST TEST & Final Assessment 17 PDF

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MAF 551 PAST TEST & FINAL EXAM TOPIC: STD COSTING 7 VARIANCE ANALYSIS TEST 1 DEC 2020 QUESTION 2 Zen Lifestyle Enterprise produces and distributes face and body care products to the local market. Currently, the business bestselling body cleanser is known as “Cherry Bath Blend” which is sold for RM90 per bottle. The business reported the following result during the month ended 31 December 2020: Units produced Sales Direct materials costs: • Cherry Fruit Extract • Glycerin • Other materials Direct labour cost: • Skilled • Semi-skilled

7,400 bottles 7,320 bottles RM 4,070 litre @ RM40 1,740 litre @ RM45 450 litre @ RM83 Total : 6,260Litres

162,800 78,300 37,350

2,220 hours @RM16 4,070 hours @RM13 6,290 hrs

35,520 52,910

Variable overhead

35,000

The standard cost card for a bottle of “Cherry Bath Blend” as follows: RM per bottle Direct materials cost: • Cherry Fruit Extract • Glycerin • Other materials Direct labour cost: • Skilled • Semi-skilled

490ml (RM41 per litre) =0.49L 250ml (RM46 per litre) 60ml (RM80 per litre) Total: 800ml = 0.8L 15 minutes (RM17 per hour) =0.25hrs 30 minutes (RM14 per hour) = 0.5hrs Total : 0.75hrs

Variable overhead Fixed overhead cost Standard cost:

15.19 20.09 9.00 / 11.50 4.20 / 4.80

3.75 / 4.25 6.00 / 7.00

7.50 5.00 50.64 / 60.14

Due to the short supply of material Cherry fruit extract in the market, the price of the material has increased to RM42 per litre. The company also plan to reduce the usage of material Glycerin to 220ml per bottle of product “Cherry Bath Blend”. It is policy of the company to absorb overhead based on direct labour hours.

Required: a. Based on the above information, compute the following variances: b. i. Direct material yield variance (AY ~ SY[Std yield of actual total material input]) x SC (std yield price) [7,400 bottles ~ [6,260L/0.8L = 7,825 bottles] x RM36.39 = RM15,466 (A) ii. Direct skilled labour mix variance (AMAH ~ SMAH) x SR [2,220 hrs ~ [0.25/0.75 x 6,290hrs= 2,097 hrs] x RM17 = RM2,091 (A) iii. Material price planning variance for Cherry Fruit Extract (OSP ~ RSP) x RSQ (RM41 ~ RM42) x (0.49L x 7400 bottles) = RM 3,626 (A) iv. Material usage operating variance for Glycerin (AQ~RSQ) x RSP (1,740L ~ [0.22 x 7400 bottles= 1,628L]) x RM46 = RM5,152 (A) (9 marks) c. The usefulness of standard costing variance analysis in a modern business environment has been questioned. Briefly explain on any two criticisms of standard costing. (4 marks) Solution Two criticisms of standard costing are: i. Standard costing was developed when the business environment was more stable and operating conditions were less prone to change. In the present dynamic environment, such stable conditions cannot be assumed. If conditions are not stable, then it is difficult to set a standard cost which can be used to control costs over a period of time. ii. Performance to standard used to be judged as satisfactory, but in today’s climate constant improvement must be aimed for in order to remain competitive. The focus in traditional standard costing environment is on minimizing costs rather than on improving quality and customer care. iii. Standard costing variances tend to be prepared on an aggregate basis. In today’s manufacturing environment there is need for variances specific to production lines and even individual batches. iv. Product life cycles tend to be shorter with the result that standard costs become quickly out of date. v. The emphasis on labour variances is no longer appropriate with the increasing use of automated production methods. Any 2 (two) Final assessment Oct 2020 Question 8 Below are extracted standard cost card for a unit of product: Skilled labour Unskilled labour

3 hours @ RM10 per hour 2 hours @ RM12 per hour

Budgeted production

5,000 units

Actual information was as follows: Skilled labour Unskilled labour Actual production

10,000 hours at a total cost of RM100,000 12,000 hours at a total cost of RM150,000 4,550 units

Calculate the Labour yield variance for the product. Laour yield variance : [Actual Yield vs Std Yield] X Std Cost [4550 units ~ [22,000/5hrs = 4,400 units] x RM 54(30+ 24) = RM8,100 (F) Question 9 Victory Sdn Bhd recently completed 52,000 units of a product that was expected to consume 15 kgs of direct material X and 35 kgs of direct material Y per finished unit. The standard price of the direct material X was RM9 per kg and direct material Y was RM8 per kg. The actual consumption of direct material X and Y are 775,550 kgs and 1,827,450 kgs respectively. Calculate the material mix variance for material X Actual production : 52,000 units Actual Consumption of Mat X : 775,550 kgs Actual Consumption of Mat Y: 1,827,450 kgs Budgeted Mat X :15kg Budgeted Mat Y: 35kg Std Cost of Mat X : RM9.00 Std Cost of Mat Y: RM8.00 DMMV (Mat X) = ActMix (AM) ~ Std Mix (SMActInput) X SP = 775,550 kg ~ [15/50 x (775,550kg + 1,827,450kg) = ] x RM9.00 = [775,550 kg ~ 780,900kg] x RM9.00 = RM 48,150 (F) Question 10 Aralyn Enterprise produces and sells Bakhoor Aromatherapy Sets in Segamat area. The business uses a standard costing system to evaluate and control its performance periodically. Below are the standard cost card for Aralyn Enterprise as at 1 December 2020: RM per set 80 Direct Material A (RM10/kg) Direct Material B (RM6/kg) 60 (RM60/RM6 = 10kg) Direct Labour (RM10/hr) 40 Production Overhead 20 Production Costs 200 Budgeted Production was 800 sets.

At the end of December 2020, actual material purchased and used was increased by 20%. Actual production was 1,000 sets of Bakhoor Aromatherapy. Determine material usage planning variance for Material B as at December 2020. Material usage planning variance (MAT B) = [OSQ ~ RSQ] X OSP = [RM60/RM6 = 10kg x 1000 sets = 10,000kg] ~ [1.2 x 10kg = 12kg x 1000 sets=12,000kg] x RM6 = [10,000kg ~12,000] x RM6 =RM12,000(A)...