1. Problem – 12 (Variance) In standard Costing, certain “ratios” are used to illustrate effective use of the resources of the company. Define these ratios and illustrate your answer by using the following figures, which are in respect of a four-week period. In this period there was a special one day holiday due to national event. Standard Working = 8 hours per day & 5 days per week Maximum Capacity = 50 employees Actual working = 40 employees Actual hour expected to be worked for four weeks = 6,400 hours Standard hours expected to be earned per four weeks = 8,000 hrs Actual hours worked in the four – week period = 6,000 hrs Standard hours earned in the four week period = 7,000 hrs

2. Problem – 13 (Quality Cost) ) To produce 1,000 units of product × the standard materials input is 1,200 units at a standard price of ` 6 per unit. The standard allows for rejects at the rate of 25% of input; it is estimated that one – third of total rejects can be reworked at an additional standard cost of ` 2 per unit. Strapped unit can be sold for 50p. each. During the period just ended, 19,500 units of × were produced 24,000 units of material were issued to production, at the standard cost of ` 6 per unit; 7,000 units were rejected on initial inspection and of these, 2,500 were reworked, at a cost of ` 5,100. The remainder were sold as scrap for 50p. unit. Required: Calculate the relevant variance.

3. Problem – 14 (Planning and Operational) ABC & Co. has set the standard price of material at ` 200 per kg. before the start of the period during the period. (i) Standard quantity of material specified for the output in the period: 20,000 kg. (ii) Actual material purchased and used: 21,000 kg. (iii) Actual purchase price paid: ` 2.80 due to an unforeseen occurrence which led to a material shortage.

4. Contd… At the end of the period, a price of ` 3.00 was agreed to have been an efficient buying price in the period. The standard costing system shows a direct material total variance of ` 8,800 made up of:- Material usage variance ` 2,000 (A) Material Price Variance ` 16,800 (A) Management wishes to distinguish between controllable and uncontrollable effects on performance.