standard costing

QUESTION 1 – STANDARD COSTING
Bela-Bela Cleaning Products (Pvt) Ltd (‘BBCP’) is a company situated in Dulibadzimu, a
town in Beitbridge, and manufactures and distributes various cleaning products.
BBCP Soap Manufacturing Division
This division manufactures and supplies environmentally-friendly bars of soap to leisure,
nature and wildlife lodges for use in their chalets and various facilities. The bars weigh
100g each and are sold for $5,50 each. They are sold in bags containing 10 bars of soap.

The Soap Manufacturing Division of BBCP manufactures the soap using an entirely
automated production process. Supervision and maintenance costs fall under overhead.
The following information regarding the cost of a bag of 10 soap bars is available:
Input at standard cost:

0,30kg of Ingredient C at $38,00 per kg
0,65kg of ingredient T at $13,00 per kg
0,2kg of Ingredient A at $21,00 per kg
1,15kg

Other information:

Variable overhead: 0,25 machine hours
Fixed overhead: 0,25 machine hours
Packaging: one (1) plastic bag at $0,30 per bag

Overheads are absorbed on the basis of machine hours. BBCP uses an absorption
costing system.
The following budget information is available regarding total overhead costs (i.e. total
variable overhead cost plus total fixed overhead cost) at different production levels (based
on variable costing principles):

Month

Total overhead cost
Production Level (fixed + variable)
Bags of Soap $
1 2 320 30 220
2 2 500 31 075
3 2 200 29 650

©NUST 2022 pg. 3

The January 2022 budget includes 600 machine hours and the production of 2 400 bags
of soap, which was the most common production level of the past two years.
The actual results for January 2022 show the following:
• 2 490 bags of soap were produced.
• 750 kg of ingredient C was purchased at $39,00 per kg. 730 kg was issue
to production.
• 1 550 kg of ingredient T was purchased for $20 460. 1 600 kg was issued
to production.
• 560 kg of ingredient A was purchased at $18,50 per kg. 550 kg was issued
to production.
• Variable overhead cost of $12 864 was incurred for 640 machine hours.
• The actual fixed overhead incurred was $20 000.
• Plastic bags were purchased at $0,30 per bag. The total cost amounted to
$747
Inventory of raw materials, packaging and finished goods are valued at standard cost.
The standard costs have not been changed for the past six months of 2021.

QUESTION 3
REQUIRED Marks

Sub-
total

Total

(a) Calculate the standard cost of one bag of soap bars for Bela-Bela
Cleaning Products (Pty) Ltd (BBCP) using an absorption costing
basis.

(7)
(7)

(b) Calculate the following standard costing variances for BBCP’s
soap division for the month of January 2022:
• Material price variances for ingredients C, T and A.
• Material mix and yield variances for ingredients C, T
and A.
• Variable overhead expenditure variance and
efficiency variance.
• Fixed overhead expenditure variance and volume
variance.

(3

Total for Question 1 25