Time to test yourself: variance analysis

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.

BudgetActual
Output (Tonnes)1,5001,600
Standard labour hours per tonne0.75
Actual direct labour hours worked1,250
Actual cost of direct labour£12,750
Standard usage of direct material per tonne of output1.1 tonnes
Standard direct material cost per tonne£120
Actual cost of direct material£234,240
Actual usage of raw material1,920 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