Philip Dunn has set you some multiple choice questions on the much-examined topic of variance analysis. Find the answers as the end of the article.
Hawsker Feeds Ltd is an SME based in North Yorkshire. It produces a single animal feedstuff that sells at £210 per tonne.
Its budget and actual activity for January X20 showed the following.
| Budget | Actual | |
| Output (Tonnes) | 1,500 | 1,600 |
| Standard labour hours per tonne | 0.75 | |
| Actual direct labour hours worked | 1,250 | |
| Actual cost of direct labour | £12,750 | |
| Standard usage of direct material per tonne of output | 1.1 tonnes | |
| Standard direct material cost per tonne | £120 | |
| Actual cost of direct material | £234,240 | |
| Actual usage of raw material | 1,920 tonnes | |
| Budgeted fixed overhead | £40,500 | |
| Actual fixed overhead | £38,000 | |
Tasks
1: Determine the standard hours produced in the month.
a. 1,250
b. 1,125
c. 1,200
d. 1,162
2: Determine the budgeted hours in the month.
a. 1,200
b. 1,500
c. 1,125
d. 1,250
3: Calculate the efficiency ratio for the month.
a. 90%
b. 111.1%
c. 104.2%
d. 96%
4: Calculate the activity or productive volume ratio for the month.
a. 93.7%
b. 106.7%
c. 90%
d. 111.1%
5: Calculate the capacity ratio for the month.
a. 111.1%
b. 96%
c. 104.2%
d. 106.7%
6: Calculate the direct labour cost variance for the month.
a. £510 Favourable
b. £750 Adverse
c. £250 Adverse
d. £1,250 Adverse
7: Calculate the direct labour rate variance for the month.
a. £225 Adverse
b. £240 Adverse
c. £250 Adverse
d. 250 Favourable
8: Calculate the direct labour efficiency variance.
a. £750 Favourable
b. £750 Adverse
c. £1,250 Adverse
d. £500 Adverse
9: Calculate the direct material cost variance.
a. £36,240 Adverse
b. £36,240 Favourable
c. £23,040 Adverse
d. £23,040 Favourable
10: Calculate the direct material usage variance.
a. £19,200 Adverse
b. £19,200 Favourable
c. £32,400 Adverse
d. £32,400 Favourable
11: Calculate the direct material price variance.
a. £3,300 Adverse
b. £3,840 Adverse
c. £3,840 Favourable
d. £3,300 Favourable
12: Calculate the fixed overhead variance.
a. £5,400 Favourable
b. £5,400 Adverse
c. £5,200 Favourable
d. £5,200 Adverse
13: Calculate the fixed overhead expenditure variance.
a. £2,700 Favourable
b. £2,700 Adverse
c. £2,500 Adverse
d. £2,500 Favourable
14: Calculate the fixed overhead volume variance.
a. £1,800 Favourable
b. £1,800 Adverse
c. £2,700 Favourable
d. £2,700 Adverse
15: Calculate the fixed overhead capacity variance.
a. £4,500 Favourable
b. £4,500 Adverse
c. £9,000 Favourable
d. £9,000 Adverse
16: Calculate the fixed overhead efficiency variance.
a. £2,700 Favourable
b. £1,800 Adverse
c. £1,800 Favourable
d. £2,700 Adverse
• Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books
Answers
1: C
2: C
3: D
4: B
5: A
6: B
7: C
8: D
9: C
10: A
11: B
12: C
13: D
14: C
15: A
16: B
