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Service costing and standard costing questions?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Service costing and standard costing questions?

  • This topic has 9 replies, 3 voices, and was last updated 7 years ago by John Moffat.
Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
    Posts
  • October 18, 2015 at 3:38 am #276936
    minhaje3
    Member
    • Topics: 68
    • Replies: 13
    • ☆☆

    Sir 2 questions from Kaplan f2 exam kit

    1. The following information relates to labour costs for the past month:

    Budget : labour rate = £10 p.h production time= 15000 hrs time per unit . time per unit = 3hrs. Production units= 5000

    Actual: wages paid = £176000. Production : 5500 units. Total hours worked= 14000 hours . no idle time.

    What were the labour rate and efficiency variances?
    They say £36000 adverse and £25000 favourable . can you please kindly explain how they got the answer and why its adverse and favourable . I know adverse means less profit and favourable means more but for clarification

    2. Service costing question: the following figures relate to two electric supply companies. A and B

    Total cost ($000). A= 600. B= 1000
    Units sold (millions) A = 2880 B= 9600
    No. Of consumers (thousands) A= 800 B= 1600
    Sales of electricity (millions) A= $18. B = $50

    Answer is company a is less efficient than B . can you please explain how they got this answer as simply as you can .

    Thank you very much,
    Mij

    October 18, 2015 at 8:01 am #276947
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    1. The hours worked should cost 14,000 x $10 = $140,000. They actually cost $176,000.
    So the variance is 36,000. The spent too much so it is adverse.

    The should have worked 5,500 x 3 = 16,500 hours. They actually worked 14,000 hours. So they were faster by 2,500 hours.
    At $10 per hour this saves them $25,000. They are saving hours so it is favourable.

    You really should watch the free lectures on variances because these two are very easy variances. (Our lectures are a complete course covering everything you need to be able to pass the F2 exam well).

    October 18, 2015 at 8:04 am #276948
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    2. The cost per unit for A = 600/2880
    For B it is 1,000/9,600

    The cost per unit is lower for B than for A therefore B is producing more efficiently.

    October 18, 2015 at 2:47 pm #277008
    minhaje3
    Member
    • Topics: 68
    • Replies: 13
    • ☆☆

    Sir, you are a lifesaver i don’t know what i would do without you. Iv’e studied the whole F2 syllabus with OT lectures and notes however, i may need to recap those technical areas again. keep going strong sir.

    Speak to you soon, Mij

    October 18, 2015 at 11:28 pm #277105
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    Thank you 🙂
    I am please that you are sorted out on these two questions.

    October 24, 2015 at 1:43 pm #278720
    acca.dina
    Member
    • Topics: 2
    • Replies: 12
    • ☆

    A unit of product L requires 9 active labour hours for completion. The performance standard for product
    L allows for ten per cent of total labour time to be idle, due to machine downtime. The standard wage
    rate is $9 per hour. What is the standard labour cost per unit of product L?
    Sir I am don’t understand this question .

    October 24, 2015 at 2:53 pm #278727
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    Please do start a new thread in future when it is a different question.

    For every 10 hours paid, 10% will be idle and therefore only 9 hours will be worked.

    The cost of working 9 hours is therefore the cost of paying for 10 hours, which is $90.

    October 24, 2015 at 4:49 pm #278736
    acca.dina
    Member
    • Topics: 2
    • Replies: 12
    • ☆

    A company manufactures a single product L, for which the standard material cost is as follows.

    $ per unit
    Material 14 kg ? $3 42

    During July, 800 units of L were manufactured, 12,000 kg of material were purchased for $33,600, of
    which 11,500 kg were issued to production.

    SM Co values all inventory at standard cost.

    What are the material price and usage variances for July?
    sir I don’t understand. please help me

    October 24, 2015 at 4:53 pm #278737
    acca.dina
    Member
    • Topics: 2
    • Replies: 12
    • ☆

    sir where is 10 hours paid?

    October 24, 2015 at 10:27 pm #278768
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    Please read again what I replied before!

    In order to work 9 hours they need to pay for 10 hours and 1 hour will be idle.

    With regard to your question on variances – first you must start a new thread when it is a different topic. Secondly, have you watched the free lectures on variances (because all the rules needed for this question are explained in the lecture!) ?

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