# Practice Assessment 2 - Task 2

Zana
AAT Student Posts:

**15**
Hi,

Can someone please help me with this task?

Any help would be much appreciated! Thank you!

Can someone please help me with this task?

Any help would be much appreciated! Thank you!

## Comments

34101Standard costs

Materials: standard cost is 36.00 / 3kg is £12 per kg

Labour: standard cost is £22.50 for 1.5 hours so that gives you 22.50 / 1.5 = £15 per hour labour.

Actual costs

Materials: you are told £10 per kg

Labour: you are told that labour cost £7,140 and that each unit takes 1.5 hours to make so

So now you have your key figures.

Materials usage variance - compares the standard usage with what was actually used. so I use the 'should use / did use' formula. So for materials usage we can ask:

Should use (300 units x 3kg) = 900kg

Did use 950kg

50kg Adverse

As it's a usage variance, you need to multiply by the cost per kg to get a monetary figure so 50 x £10 = £500 adverse

(so you've used £500 more material that you should have done)

Labour rate variance - compares what you should be paying per hour (i.e. your standard rate of £15 (as above)) against what you actually paid.

Should cost (300 x £15 x 1.5) = £6,750

Did cost £7,140

£390 Adverse

(so you've paid £390 more for labour than you should have done.

With the variable OH eff variance, you need to look compare the standard with the actual, but as I cannot see in the question that you have been given the actual cost then you cannot compare that to the standard. Therefore, I would put a 0 in the box and show it as no variance.

15102(£12.00 * 900kg) - (£12.00 * 960kg) = £720.00 Adverse

Labour rate variance = (Standard rate per hour * actual hours) - Actual labour cost.

(£15.00 * 420 hours) - £7,140 = £840 Adverse

Variable overhead efficiency variance = (Standard rate per hour * standard hours at actual output) - (Standard rate per hour * actual hours at actual output).

(£7.00 * 450 hours) - (£7.00 * 420) = £210 Favourable.

Fixed production overhead expenditure variance = budgeted FPOH - actual FPOH.

£16,000-£18,200 = £2,200 Adverse.

Absorption rate = Budgeted fixed overheads / budgeted units. £16,000 / 12,800 = £1.25 per unit.

Fixed production overhead volume variance = (Actual units * absorption rate - (Budgeted units * absorption rate)

(14,000 * £1.25) - (12,800 * £1.25) = £1,500 Favourable.

Hope that makes sense.

Matthew Dearlove MAATCurrently on CIMA Management Level. Passed P2, F2 and E2. Preparing for November 19 MCS.

102Labour rate variance - You calculated the total labour variance. To calculate the labour rate variance, you need to multiply the standard rate per hour by the actual hours worked, then take the actual cost of labour.

Variable overhead efficiency - you only need to compare the actual variable overhead cost when calculating the variable overhead rate variance. We only need the standard and actual hours worked and the standard cost, which we have.

Matthew Dearlove MAATCurrently on CIMA Management Level. Passed P2, F2 and E2. Preparing for November 19 MCS.

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