# Financial and Management Accounting for Managers

Topics: Cost accounting, Cost, Direct material price variance Pages: 14 (2236 words) Published: November 16, 2013
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AC1010
Financial and Management Accounting for Managers

Course Work for Semester 2

Submitted by: Emerson K.Yip
G-number:
Date: May 1, 2013

Table Content :

Page

1. Calculation of Standard Cost per unit for each of the products 3

2. Reconciliation Statement between Standard cost at actual 7 production and Actual Cost of Production.

3. List of possible reasons for each of the variance arising 10

4. Write a brief note outlining the advantages and disadvantages 13 of using variance analysis as a means of controlling a business

Question 1. Calculation of Standard Cost per unit for each of the products.

Part 1 :

Standard Cost of Deluxe Model : ₤430.20/unit

Working :

Deluxe Model

Glass
Wood
Direct Material/unit
102.40
179.00

Skilled
Unskilled
Direct Labor
105.60
43.20

Total Per Unit Direct Material Cost
281.40
= 102.4+179
Total Per Unit Direct Labor Cost
148.80
= 105.6+43.2

Total Per Unit Prime Cost
430.20
= 281.4+148.8

Note :

Computation of Direct Material Cost per unit

Direct Material Cost / Unit = material cost of glass + material cost of wood = 12.80x8 + 17.90 x 10
= 102.4 + 179
= ₤281.40/unit
Computation of Direct Labor cost per unit

Direct Labor Cost /unit = skilled labor cost + unskilled labor cost = 6.6 x 16 + 5.4 x 8
= 105.60+43.20
= ₤148.80/unit

Total prime cost /unit = Direct labor cost /unit + Direct material cost/unit = 281.40 + 148.80
= ₤430.20/unit
Part 2

Standard Cost of Standard Model :₤309.20/unit

Working :

Standard Model

Plasic
Metal
Direct Material/unit
118.00
52.00

Skilled
Unskilled
Direct Labor
52.80
86.40

Total Per Unit Direct Material Cost
170.00
= 118+52
Total Per Unit Direct Labor Cost
139.20
= 86.4+52.8

Total Per Unit Prime Cost
309.20

Note :

Computation of Direct Material Cost per unit

Direct Material Cost / Unit = material cost of plastic + material cost of metal = 5.9x20 + 6.5 x 8
= 118 + 52
= ₤170.00/unit
Computation of Direct Labor cost per unit

Direct Labor Cost /unit = skilled labor cost + unskilled labor cost = 6.6 x 8 + 5.4 x 16
= 52.8+86.4
= ₤139.20/unit

Total prime cost /unit = Direct labor cost /unit + Direct material cost/unit = 170 + 139.20
= ₤309.20/unit

Question 2 : A statement reconciling Standard cost against Actual cost

Statement of Reconcilation of Standard Cost of Actual Production and Actual Cost of Production
For the Month of February, 2013

Standard Cost of Actual Output

255,361.60

Less :
Materials Price Variances

(1,629.60)

Materials Qty. Variances

(2,787.40)

Total Materials Variances

(4,417.00)

Less
Wages Rate Variances

7,308.00

Wages Efficiency Variances

2,592.00

Total Labor Variances

9,900.00

Total Variances

5,483.00

Actual Cost of Actual Production

249,878.60

Computation of Actual Cost at Actual Production

Glass

31,875.00

Plastic

49,290.00

Wood

59,015.00

Metal

18,726.60

Total Actual Direct Material Cost

158,906.60

Skilled Labor

47,520.00

Unskilled Labor

43,452.00

Total Actual Direct Labor Cost

90,972.00

Actual Cost of the Actual Outputs

249,878.60

Working :

Materials Price Variances = AQ x (SP - AP)

Material Price Variance of Glass = AQ x (SP - AP) for glass = 2550 x (12.8-12.5)...