Standard Costing

STANDARD COSTING WITH SOLUTIONS
Question 1: Calculate Material Price Variance and Material Usage Variance: Standard (1 FG) Actual (1 FG) Kg Rate Kg Rate Amount (`) 18,000 10 1,80,000 20,000 12 5,000 20
Amount (` 2,40,000 1,00,000
After analysing, it was found that out of 25,000 unit, 5,000 units were purchased as an emergency order at higher rate @ ` 20.
Solution:
Material Price Variance = (S.P. A.P.) A.S. = (10 12) 20,000 + (10 12) 5,000 = ` 50,000 (A) Material Usage Variance = Excess price variance due to emergency order + (S.Q. A.Q.) S.P. = (12 20) 5,000 + (18,000 25,000) 10 = ` 1,10,000 (A) --------------------------------------------------------------------------------------------------------------------------------------Question 2: A manufacturing concern which has adopted standard costing furnishes following information: Standard Material for 70 kg of Finished Products 100 kg Price of Materials ` 1 per Kg Actual: Output Materials used Cost of materials 2,10,000 Kg 2,80,000 Kg ` 2,52,000
Calculate (a) Material Usage Variance (b) Material Price Variance (c) Material Cost Variance.
Solution: Data for Material Variance (2,10,000 kg)

Standard (Output 2,10,000 kg) Qty. Rate Amount (`) 3,00,000 kg 1 3,00,000 Sl. No. Particulars 1. Material Usage Variance 2. 3. Material Price Variance Material Cost Variance Actual (Output 2,10,000 kg) Qty. Rate Amount (`) 2,80,000 0.90 2,52,000
Statement of Variance
Basis (Std.Qty. A.Qty.) S.P. (3,00,000 2,80,000) 1 (S.P. A.P.) A.S. (1 0.90) 2,80,000 (Material Usage + Material Price Variance) i.e. SCAC Amount (`) 20,000 Favourable 28,000 Favourable 48,000 Favourable
--------------------------------------------------------------------------------------------------------------------------------------Question 3: From the data given below, calculate the material price variance, the materials usage variance and material cost variance.
Consumption per 100 Units of Product

Raw material A B Standard 40 units @ ` 50 per unit 60 units @ ` 40 per unit Actual 50 units @ ` 50 per unit 60 unit @ `45 per unit
Solution:
Item A B Standard Qty. Rate 40 60 50 40
Data for Material Variances

Actual Amount ( `) 2,000 2,400 4,400 A B 50 60 110 50 45 Item Qty. Rate Amount ( `) 2,500 2,700 5,200 Amount (`)
Statement of Variances
Sl. No. 1. Particulars Material Price Variance Basis (S.P. A.P.) A.Q. A (50 50) 50 = 0 B (40 45) 60 = 300 Adverse (S.Q A.Q.) S.R A (40 50) 50 = 500 B (60 60) 40 = 0
300 (Adverse) 500 (Adverse)
2.
Material Usage Variance
Material Cost Variance = Material Price Variance + Material Usage Variance

= 300 (A) + 500 (A) = ` 800 (A) OR
Material Cost Variance = Standard Cost Actual Cost

= 4,400 5,200 = ` 800 (Adverse) --------------------------------------------------------------------------------------------------------------------------------------Question 4: From the following information, compute (a) Cost Variance (b) Price and (c) Usage Variance. Standard Actual Quantity Unit Price Quantity Unit Price Total (`) Total (`) Material A 10 2 20 5 3 15 Material B 20 3 60 10 6 60 Material C 20 6 120 15 5 75 Total 50 4 200 30 5 150
Solution:
Data for Material Variance

Budgeted/Standard (1 FG) Amount ( `) Item Actual (1 FG) Qty. Rate Amount ( `) 20 60 120 200 A B C 5 10 15 30 3 6 5 15 60 75 150 Amount (`)
A B C
10 20 20
2 3 6
Sl. No. 1. Particulars Material Price Variance Basis (S.R. A.R.) AQ A (2 3) 5 = 5 (A) B (3 6) 10 = 30 (A) C (6 5) 15 = 15 (F) (S.Q. A.S.) S.R. A (10 5) 2 = 10 (F) B (20 10) 3 = 30 (F) C (20 15) 6 = 30 (F) M.P.V. + M.U.V. 20 (A) + 70 (F)
20 (A)
2.
70 (F)
3.
Material Cost Variance
50 (F)
------------------------------------------------------------------------------------------------------------------------------------------------------Question 6: Vinak Ltd. produces an article by blending two basic raw materials. It operates a standard costing system and the following standards have been set for raw materials: Material Standard Mix Standard Price per kg A 40% `4.00 B 60% ` 3.00 The standard loss in processing is 15%. During April, 1980, the company produced 1,700 kg of finished output. The position stock and purchases for the month of April, 1980 is as under: Material Stock on 1.4.80 of kg Stock on 30.4.80 kg Purchased during April 1980 kg A B 35 40 5 50 800 1,200 Cost (`) 3,400 3,000
Calculate the following Variances: (i) Material Price Variance (ii) Material Usage Variance (iii) Material Yield Variance (iv) Material Mix Variance (v) Total Material Cost Variance.
Solution:
Data for Material Variances
Material Budgeted Standard Standard for Actual Actual
Qty.
Rate
Amount ( `)
Qty.
Rate
Amount ( `)
Qty.
Rate
Amount ( `)
A B
40 60 100
4 3
160 180 340
800 1200 2,000
4 3
3,200 3,600 6,800
808 1,212
830 1,190 2,020
4.2394 2.5168
3,518.75 2,995.00 6,513.75
Sl. Particulars No. 1. Material Price Variance Basis Amount (`) (S.P. A.P.) A.Q. A: (4 4.2394) 830 = 199 (A) B: (3 2.5168) 1190 = 575 (F) 2. Material Usage Variance (S.Q. A.Q.) S.R. A: (800 830) 4 = 120 (A) B: (1,200 4,190) 3 = 30 (F) 3. Material Yield Variance (Standard Ratio for total standard quantity Standard ratio for total actual quantity) S.R. A: (800 808) 4 = 32 (A) B: (1,200 1,212) 3 = 36 (F) 4. Material Mix Variance (Standard Ratio for actual mix Actual ratio for actual mix) S.R. A: (808 830) 4 = 88 (A) B: (1,212 1,190) 3 = 66 (F) 5. Material Cost Variance Material price variance + Material Usage Variance 376 (F) + 90 (A)
376 (F)
90 (A)
68 (A)
22 (A) 286 (F)
Actual price per kg. Material A:` 35 4 + 795 4.25

35 + 795 = `3518.85 = ` 4.239 830 Material B:-
` 40 3 + 1150 2.5
40 + 1150 = ` 2995 = ` 2.5168
1190 ------------------------------------------------------------------------------------------------------------------------------------------------------Question 7: Modern Tiles Ltd manufactures plastic tiles of standard size of 6 6 1/8. From the following information, you are required to calculate following variances for direct materials:
I. The cost variance in total:

1. The cost variance sub-divided into (a) price (b) usage, and 2. The usage variance analysed to show (a) mixture (b) yield. A standard mix of the compound 20,000 square feet required to produce an output of tiles of 1/8 thickness is as follows Direct Materials Qty. (kg) Price (` per kg)
A B C
600 400 500
1 2 3
During December 1991, eight mixes were processed and actual materials consumed were as follows: Direct Materials Qty. (kg) Price (` per kg) A 5,000 2 B 2,900 4 C 4,400 5 Actual production for December was 6,20,000 tiles.
Solution:
Materials Materials A B C Budgeted (80,000) Qty. Rate 600 400 500 1500 1 2 3

Standard (6,20,000) Qty. 4,650 3,100 3,875 Rate 1 2 3 S.Q. for Act. Mix Qty. 4,920 3,280 4,100 Actual (6,20,000) Qty. 5,000 2,900 4,400 12,300 Rate 2 4 5
(`) 600 800 1,500 2900
(`) 4,650 6,200 11,625 22,475
(`) 10,000 11,600 22,000 43,600

Amount (`)
S.. No. 1. Particulars Material Price Variance (M.P.V.) Basis (S.R. A.R.) A.Q. A (1 2) 5000 = 5000(A) B (2 4) 2900 = 5800(A) C (3 5) 4400 = 8800(A) (S.Q. A.Q.) S.P. A (4650 5000) 1 = 350(A) B (3100 2900) 2 = 400(F) C (3875 4400) 3 = 1575(A) (S.Q. for actual mix Actual Quantity) S.P. A (4920 5000) 1 = 80(A) B (3280 2900) 2 = 760(F) C (4100 4400) 3 = 900(A) (Standard quantity Standard ratio for actual quantity) S.P. A (4650 4920) 1 = 270(A) B (3100 3280) 2 = 360(A) C (3875 4100) 3 = 675(A) M.P.V. M.U.V. 19,600(A) + 1525(A)
19,600 (A)
2.
Material Usage Variance (M.U.V.)
1,525 (A)
3.
Material Mix Variance
220 (A)
4.
Material Yield Variance
1,305 (A)
5.
21,125 (A)
Working Notes: Calculation of Budgeted No. of Tiles NO. of Tiles= A/a = 20,000 Sq. Ft/6 X 6 sq. inch = 20,000 X12 X 12 sq. inch/36 X sq inch = 80,000 units. --------------------------------------------------------------------------------------------------------------------------------------Question 8: From the data given below, calculate Particulars X Y
Raw material purchases Issue to works Works stock of material: Opening Closing
Qty. (kg) 2,000 kg 2,150 kg 300 kg 200 kg
Value
` 4,000

Qty. (kg) 5,000 3,950 1,000 1,250
Value
` 6,250

Standard Price: Material X ` 1.90 per kg, Material Y ` 1.30 per kg. Standard Usage: Material X Material Y Product A 1 kg 1 kg Product B 0.5 kg 1 kg Output during the period: Product A 1,130 units, Product B 2,550 units. The following data is given 1. Calculate the individual material price variances for the two materials X and Y assuming that price variances are calculated at the time of purchase. 2. Calculate the individual material usage variances for material X and Y assuming that there was no work in progress either at the commencement or at the end of the period. Data for material variance Budgeted/Standard Raw Material Qty. (W.N. 1) Rate Amount (`) X Y 2,405 3,680 1.90 1.30 4,569.50 4,784.00
Solution:
Qty. (W.N. 2) 2,250 3,700
Standard Rate Amount (`) 2.00 1.25 4,500 4,625
Sl. No. 1. Particulars Material Price Variance Basis (S.R A.R.) A.Q. purchaser Material X (1.90 2) 2,000 Material Y (1.30 1.25) 5,000 (S.Q A.Q.) S.R. Material X (2,405 2,250) 1.90 Material Y (3,680 3,700) 1.30 Amount (`) 200 (A) 250 (F) 294.50 (F) 26 (A)
2.
Working Notes: 1. Calculation of Standard Quantity of Raw Material Required Material X: No. of products Material required/unit of product
= (1,130 1) + (2,550 0.5) = 1,130 + 1,275 = 2,405 kg Material Y: (1,130 1) + (2,250 1) = 3,380 kg
2. Calculation of Actual Quantity Consumed Material

Opening Stock at works Issue to works by purchase department
X (kg)
300 2,150
Y (kg)
1,000 3,950
() Closing stock at works
2,450 200
4,950 1,250
Actual consumption 2,250 3,700 ------------------------------------------------------------------------------------------------------------------------------------------Question 9: (Break up of Material Cost Variances when standard mix and actual usage are given) X Ltd is producing floor covers in roll of standard size measuring 3 m wide and 30 m long by feeding raw materials to a continuous process machine. Standard mixture fixed for a batch of 900 sq. m of floor cover is as follows: 2,000 kg of material A at ` 1.00/kg 800 kg of material B at ` 1.50/kg 20 gallons of material C at `` 30/gallon. During the period, 1505 standard size rolls were produced from the material issued for 150 batches. The actual usage and the cost of materials were: 3,00,500 kg of material A at ` 1.10/kg 1,19,600 kg of material B at ` 1.65/kg 3,100 gallons of material C at `29.50/gallon. Present the figures to management showing the break-up of material cost variances arising during the period. Solution: Data for Variance Budgeted Actual Qty Rate Qty Rate Amount (`) Amount (`) A B C 2,000 800 20 1 lot 1 1.5 30 2,000 1,200 600 3,800 3,00,500 1,19,600 3,100 150.5 lot Standard Rate 1 1.5 30 1.1 1.65 29.5 3,30,550 1,97,340 91,450 6,19,340
A B C
Qty 3,01,000 1,20,400 3,010 150 lot
Amount (`) 3,01,000 1,80,600 90,300 5,71,900
Material Price Variance: A = (1 1.1) 3,00,500 (1.5 1.65) 1,19,600 C = (30 29.5) 3,100
= 30,050 (A) = 17,940 (A) = 1,550(F) = 46,440 (A) Material Usage Variance= (SQ AQ) SR
A: (3,01,000 3,00,500) 1 = 500(F) B: (1,20,400 1,19,600) 1.5 = 1200(F) C: (3,010 -3,100) X 30 =2,700 (1,000) (A) Material Cost Variance: = SC AC Or MPV + MUV = (46,440) + (1,000) = (47,440) (A). --------------------------------------------------------------------------------------------------------------------------------------Question 10: 1 kg of product K requires two chemicals A and B. The following were the details of product K for the month of June 1987: 1. Standard mix Chemical A 50% and Chemical B 50%. 2. Standard price per kilogram of Chemical A ` 12 and Chemical B ` 15. 3. Actual input of Chemical B 70 kilograms. 4. Actual price per kilogram of Chemical A ` 15. 5. Standard normal loss 10% of total input. 6. Materials cost variance total ` 650 adverse. 7. Materials yield variance total `` 135 adverse. Required: Calculate: Material mix variance total Material usage variance total Material price variance total Actual loss of actual input Actual input of Chemical A Actual price per kilogram of Chemical B Solution:

Standard Material Qty. (kg) 50 50 100 for 90G Rate (`/kg) 12 15 Amount ( `) 600 750 1,350 Standard Ratio for Actual Mix 55 55 110 Qty. (kg) Actual Rate (`/kg) 15 20 Amount ( `) 600 1,400 (B.f.) 2,000
A B
40 70 110 (W.N. 2)
Statement of Requirement 1. Material Mix Variance= (Standard Ratio for Actual Mix Actual Ratio for Actual Mix)
Standard Rate = (55 40) 12 + (55 70) 15 = (15 12) + (15 15) = 15 3 = 45 = 45 (A) 2. Material Usage Variance= (S.Q. A.Q.) S.R.
= (50 40) 12 + (50 70) 15 = 180 (A) 3. Material Price Variance= (S.R. A.R.) A.Q. =(12 15 ) X 40 + (15 20) X 70 = 470 (A)
4. Actual Loss 5. Actual Input of Chemical A
= (110 90) = ` 20/kg = 110 70 = ` 40/kg
6. Actual Price per Kg of Chemical B = ` 1,400/70 = ` 20/ kg

Working Notes: . M.C.V = S.C. A.C. - 650 = 1,350 A.C. Actual Cost = 1,350 + 650 = 2,000 2. Material Yield Variance = (Total Standard Quantity Total Actual Quantity) Standard Weighted Avg. Rate -135 = (100 T.A.Q) X 1,350/100 - 13,500 1,350 = 100 T.A.Q. - 10 = 100 T.A.Q. Total Actual Quality = 100 + 10 = 110 kg
------------------------------------------------------------------------------------------------------------------Question 12: The following information is provided. Standard Wages: Grade X: 90 Labourers at ` 2 per hour
Grade Y: 60 Labourers at ` 3 per hour 70 Labourers at ` 2.00 per hour
Actual Wages:
Grade X: 80 Labourers at ` 2.50 per hour Grade Y:
Budgeted Hours 1,000; Actual Hours 900; Budgeted Gross Production 5,000 units;
Standard loss 20%; Actual Loss 900 units. Required: Calculate the labour variances from the above information.
Solution:
Material X Y Lab. Hrs 90 1,000 = 90,000 60 1,000 = 60,000
Data for Labour Variances

Budgeted (4000) Rate Amount (` 1,80,000 1,80,000 Standard (4100) Lab. Hrs (W.N. 2) 92,250 61,500 Rate 2 3 Amount (`) 1,84,500 1,84,500 80 900 = 72,000 70 900 = 63,000 2.50 2.00 Actual (4100 units) Lab. Hrs Rate Amount (`) 1,80,000 1,26,000
`/hr
2 3
1,50,000 Sl. No. Particulars
3,60,00 1,53,750
3,69,000
1,35,000
3,06,000
Basis Amount (`)
1. Labour rate variances
(S.R. A.R.) Actual payment hours Grade X (2 2.50) 72,000 = 36,000 (A) Grade Y (3 2) 63,000 = 63,000 (F) 2. Labour efficiency variance (Standard hour Actual work hrs.) Standard rate Grade X (92,250 72,000) 2 = 40,500 (F) Grade Y (61,500 63,000) 3 = 4500 (F)
27,000 (F)
36,000 (Fav.)
Working Notes: 1. Calculation of Net Production

Gross Production () Loss (Normal) Net Production Budgeted (Units) 5,000 1,000 (20% of 5,000) 4,000 Actual (Units) 5,000 9,00 4,100
We should assume that Budgeted gross & actual gross production will be same.
2. Calculation of Revised Budgeted Hrs.
X:
4,000 F.G. = 90,000 Labour Hrs. 1 F.G 90,000 LAbour Hrs. 4,000 4100 F.G. = 90,000 4,000 X 4,100 Labour Hr. = 92,250 Labour Hrs. Y: 4,000 F.G. = 60,000 Labour Hrs. 1 F.G 60,000 LAbour Hrs. 4,000 4100 F.G = 60,000 X 4,100 Labour HRs. 4,000 = 61,500 Labour Hrs ------------------------------------------------------------------------------------------------------------------------------------------------------Question 13: A gang of workers usually consists of 10 men, 5 women and 5 boys in a factory. They are paid at standard hourly rates of ` 1, ` 2 and ` 3, respectively. In a normal working week of 40 hours the gang is expected to produce 1,000 units of output. In a certain week, the gang consisted of 13 men, 4 women and 3 boys. Actual wages were paid at the rates of ` 3, ` 4 and ` 5, respectively. Two hours were lost due to abnormal idle time and 960 units of output were produced. Calculate various labour variances. Solution: Data for Labour Variance
Budgeted (1000) Lab Hr. Men Women 400 200 Rate 1 2 Amount (`) 400 400 600 Revised Budgeted (960) Lab Hr. 384 192 Rate 1 2 Amount (`) 384 384 576 Lab Hr. 520 160 Actual (960) Rate 3 4 Amount (`) 1,560 640 600 Actual Working Hours 494 152
Boys
200
1,400
192
1,344
120
2,800
114
Statement of Labour Variance

Sl. No. 1. 2. Particulars Labour Cost Variance Labour Rate Variance Basis (S.C. A.C.) 1344 2800 (S.R. A.R.) Actual Payment Hrs Men: (1 3) 520 = 1040 (A) Women: (2 4) 160 = 320 (A) Boys: (5 43) 120 = 240 (A) (Standard Hrs. Actual Working Hours) S.R. Men: (384 494) 1 = 110 (A) Women: (192 152) 2 = 80 (F) Boys: (192 114) 3 = 234 (F) (Idle Time S.R.) Men: 13 2 1 Women: 4 2 2 Boys: 3 2 3 Amount (`) 1,456 (A)
1,600 (A)
3.
Labour Efficiency Variance
204 (F)
4.
Labour Idle Time Variance
= 26 (A) = 16 (A) = 18 (A)
60 (A)
------------------------------------------------------------------------------------------------------------------------------------------------------Question 16: The details regarding the composition and the weekly wage rates of labour force engaged on a job scheduled to be completed in 30 weeks are as follows: Standard Actual Category or No. of Labourers Weekly wage rate No. of Weekly wage rate Workers Labourers per Labourer (`) per Labourer (`) Skilled 75 60 Semi-skilled 45 40 Unskilled 60 30 The work is actually completed in 32 weeks. Required: Calculate the various labour variances. 70 30 80 70 50 20
Solution:
Category Category Skilled Semi-skilled Unskilled Time (weeks) 2,250 1,350 1,800
Data for Labour Variance

Budget/Revised Rate (`/week) 60 40 30 Amount (`) 1,35,000 54,000 54,000 Standard Ratio for Actual Mix (weeks) 2,250 _____ 2,400 (5400 5,760 1,350 _____ 1,440 ( 5400 5,760 1,800 _____ 1,920 (5400 5,760 5760 5760 Qty. 2,240 960 2,560 5,760 Actual Rate 70 50 20 Amount (`) 1,56,800 48,000 51,200
5400
2,43,000
5,760
2,56,000
Statement of Labour Variances

Sl. No. 1. Particulars Labour cost variance Labour rate variance Standard Cost Actual Cost 2,43,000 2,56,000 = 13,000 (Adv.) (S.R. A.R.) Actual Payment Hrs Skilled: (60 70) 2240 Semi-skilled: (40 50) 960 Unskilled: (30 (S.Q. A.Q.) S.R Skilled: (2,250 2,240) 60 Semi-skilled: (1,350 960) 40 Unskilled: (1,800 2,560) Basis Amount (`) 13,000 (A)
2.
= 22400 (A) = 9600 (A) = 25600 (F)
6,400 (A)
3.
Labour efficiency variance
= 600 (F) = 15,600 (F) = 22,500 (A)
6,600 (A)
4.
Labour mix variance
(S. Ratio for Actual Mix Actual Ratio for Actual Mix) S.R. Skilled: (2,400 2,240) 60 = 9,600 (F) Semi-Skilled: (1,440 960) 40 = 19,200 (F) Unskilled: (1,920 2,560) 30 = 19,200 (A) (Standard Ratio for Standard Quantity Standard Ratio for Actual Quantity) S.R. Skilled: (2,250 2,400) 60 = 9000(A) Semi-Skilled: (1350 1440) 40 = 3600(A) Unskilled: (1800 1920) 30 = 3600(A)
9,600 (F)
5.
Labour yield variance
16,200 (A)
--------------------------------------------------------------------------------------------------------------------------------------Question 18: The following data is given: Particulars Budget Actual Production (in units) 400 360 Man hours to produce above 8,000 7,000 10,000 9,150 Variable Overheads (in `) The standard time to produce one unit of the product is 20 hours.
Required:
Calculate variable overheads variances and give necessary journal entries to record transactions.
Solution:
Budget (400 FG) Hrs Labour 8,000 Rate 1.25 Amount (`) 10,000 Hrs 7,200 Standard (360 FG) Rate 1.25 Amount Hrs 7,000 Actual (360 FG) Rate 1.3071 Amount (`) 9,150
`) 9,000
Variable Overhead Cost Variance: = SC AC = 9,000 9,150 = 150 (A) Variable Overhead Efficiency Variance: = (SH AH) SR = (7,200 7,000) 1.25 = 250 (F) Variable Overhead Exp. Variance: = (SR AR) Actual Working Hours = (1.25 1.3071) 7,000 = 400 (A) --------------------------------------------------------------------------------------------------------------------------------------------------------------------
Question 21: In Department A of a plant, the following data are submitted for the week ended 31st March 1993:
Standard output for 40 hours per week Budgeted fixed overheads Actual output Actual hours worked Actual fixed overheads 1,400 units ` 1,400 1,200 units 32 hours ` 1,500
Required: Prepare a statement of variances.
Solution: Statement of Variances

Fixed Overhead Volume Variance = (Recovered Overhead Budgeted Overhead) = 1,200 1,400 = 200 (A) Fixed Overhead Expenditure Variance = (Budgeted Overhead Actual Overhead) = 1,100 1,000 = 100 (A) Fixed Overhead Efficiency Variance = (Standard Hours Actual Hours) RR = (34.2857 32) 35 = 80 (F) Fixed Overhead Capacity Variance = (Actual Working Hours Budgeted Hours) Recovery Rate = (32 40)35 = (280) (A) ---------------------------------------------------------------------------------------------------------------------------------------
Question 25:
Budgeted no. of working days Budgeted no. of hours per month Fixed overhead rate Actual no. of working days in June 24 12,000 ` 0.50 per hour 25
Compute the calendar variance
Solution:
Calendar Variance = (Actual days Budgeted days) Recovery Rate Per day
= (25 24) 250 (W.N. 1) = 1 250 = ` 250 (F) Working Notes: 1. Calculation of Recovery Rate 2. Budgeted hours per month = 12,000 hrs. 3. fixed overhead rate = 0.50/hr. 4. Budget fixed overhead (In a month) = ` 6,000 5. Recovery Rate per day 6,000 = Total fixed Budget Oh No. of Working days in a month 24 = `250/day ----------------------------------------------------------------------------------------------------------------------------------
Question 26: You are given the following data:
STATEMENT OF FIXED OVERHEAD VARIANCES

SL. NO. Particulars 1 Fixed overhead volume variances 2 Fixed Overhead expenditure variances 3 Fixed overhead cost variances Basis Amount Recovered-Budgeted 1,000(A) 9000- 10,000 Budgeted- Actual 500(A) 10,000 10,500 Recovered-Actual 1,500(A) 9000 10,500 ----------------------------------------------------------------------------------------------------------------------------
Question 27:
Fixed overhead as per budget, i.e. estimated ` 5,000
Budgeted hours, i.e. estimated Actual hours worked Actual fixed overhead Required: Compute the expenditure and volume variances.
Solution:
Statement of Fixed Overhead Variances

Sl. No. Particulars 1. Fixed overhead Expenditure variance 2. 3. Fixed overhead volume variance Fixed overhead total variance Basis Budgeted Actual Amount 600 (A) 1500 (A) 2100 (A)
` 5,000 ` 5,600
Recovered Budgeted
` 3,500 ` 5,000
Recovered Actual
` 3,500 ` 5,600 --------------------------------------------------------------------------------------------------------------------------------------
Question 28:
Budgeted Output A B C D E F G Budgeted Hour 10 2 8 50 10 8 12 100 Actual Hour 8 20 40 15 15 Actual Output A C D F G
Budgeted overhead = `10,000 Actual overhead = ` 12,500. Required: Calculate the xed overhead volume and Exp variance. Solution:
Statement of fixed overhead variances

Sl. No. 1. 2. Particulars Fixed overhead expenditure variances Fixed overhead volume variances Basis Budgeted Actual 10,000 12,500 Recovered Budgeted 8,800 10,000 Amount 2,500 (A) 1,200 (A)
Note: If a company produces different products and every product does not consume equal budgeted hours, it is better to apportion high part of fixed OH to the product which has high budgeted hours. (The product here means actual output). In other words, we can say recovery should be on the basis of budgeted hours for actual outputs. If a company produces different products and every product consumes equal budgeted hours, overhead may be recovered either on the basis of actual output or budgeted hours for actual output. -------------------------------------------------------------------------------------------------------------------------------------------------------
Question30: A company has a normal capacity of 120 machines, working 8 hours per day of 25 days in a
month. The fixed overheads are budgeted at ` 1,44,000 per month. The standard time required to manufacture one unit of product is 4 hours. In April 1998, the company worked 26 days of 840 machine hours per day and produced 5,305 units of output. The actual fixed overheads were `1,42,000. Required: Compute 1:- Eciency variance 2:-Revised capacity variances 3:- Calendar variance 4:- Expense variance 5:- Volume variance
6:- Total xed overheads variance
Sl. 1. Particulars Efficiency variance Basis (S. Hr A.W.Hr) R.R = (21.220 21,840) 6 Total Cap. variance Calendar Variance 12,960 5,760 (W.N. 1) (Actual days Budgeted days) Standard Rate/day = (26 25) 5,760 = 5,760 Budgeted Actual 1,44,000 1,42,000 Recovered Budgeted 1,27,320 1,44,000 Recovered Actual 1,27,320 1,42,000 Amount (`) 3,720 (A) 18,720 (A)
2.
Revised Capacity variance
3.
Calendar variance
5,760 (F)
4.
Expenses variance
2,000 (F)
5.
Volume variance
16,680 (A)
6.
Total fixed overhead variance
14,680 (A)
Working Note1 Calculation of total Capacity Variance Total Capacity Variance = (Actual Working Hours Budgeted Hour) X Recovery Rate = (21,840 24,000) X 6 = 12,960 Adverse --------------------------------------------------------------------------------------------------------------------------------------Question 31: The following figures are extracted from the books of a company: Particulars Budget Actual Output ( in units) 6,000 6,500 Hours 3,000 3,300 Overhead Cost-fixed 1,200 1,250 Variable 6,000 6,650 Number of days 25 27 Required: Compute and analyse the overhead variances.
Note: Assume 8 Working Hour Per day, Budgeted Hours = 20 8, Actual Hour = 21 8.
Sl. No. 1.
Particulars Fixed OH Volume Variances Recoverd Budgeted 1,300 1,200 Budgeted Actual 1,200 1,250 Recovered Actual 1,300 1,250
Basis
Amount (`) 100 (F)
2. 3.
Fixed OH Expenditure Variances Fixed OH Cost Variance
50 (A)
50 (F)
4.
Fixed OH Efficiency Variance
(S. Hrs A.W.Hrs) Recovery Rate = (3,250 3,300) 0.40 (A.W.Hrs Bud. Hrs) Recovery Rate = (3,300 3,000) 0.40 (Actual Work Days Budgeted days) R.R./day 1,200 _____ = (27 25) 25 Total Capacity Variance Calendar Variance = 120 Fav. 96 Fav. Standard variable OH for Actual Output Actual variable OH Actual Output 6,000 _____ = 6,500 6,650 6,000 = 6,500 6,650
20 (A)
Fixed OH Capacity Variance
120 (F)
6.
Fixed OH Calendar Variance
96 (F)
7.
Fixed OH Balanced Capacity Variance Variable OH Variable
24 (F)
8.
150 (A)
-------------------------------------------------------------------------------------------------------------------------------------------Question 32: The following information was obtained from the records of a manufacturing unit using Standard Costing System: Production Standard 4,000 units Actual 3,800 units (`) Working days Fixed overhead Variable overhead 20 40,000 12,000 (`) 21 39,000 12,000
Required: Calculate the following overhead variances: Variance overhead variance (b) Fixed overhead variance. Expenditure Variance (b) Volume Variance (c) Eciency Variance (iv) Calendar variance.
Sl. No. Particulars Basis Amount (`)
1. Variable OH Variances
Standard Variable OH for actual output Actual variable OH for actual output 12,000 ______ 4000 3,800 12,000 = 11,400 12,000 Recovered Actual 38,000 39,000 = 1,000 Budget Actual 40,000 39,000 Recovered Budged 38,000 40,000 (Standard Working Hr Actual Working Hour) R.R./hr. (152 168) ` 250/hr. (Actual Working days Budgeted Working days) R.R. per day 40,000 ______ (21 20) 2
600 (A)
2. Fixed OH Variance
1,000 (A)
3. Fixed OH Expenditure Variance
1,000 (F)
4. Fixed OH Volume Variance
2,000 (A)
5. Fixed OH Efficiency Variance
4,000 (A)
6. Fixed OH Calendar Variance
2,000 (F)
Question 33: A Cost Accountant of a company was given the following information regarding the overheads for February 1987: Overheads cost variance ` 1,400 adverse. Overheads volume variance 1,000 adverse. Budgeted hours for February 1987 1,200 hours. Budgeted overheads for February 1987 ` 6,000. Actual rate of recovery of overheads ` 8 per hour. Required: To Assist the cost accountant in computing the following for February 1986 1:- Overheads expenditure variance 2:- Actual overheads incurred 3:- Actual hours for actual production 4:- Overheads capacity variance 5:- Overheads eciency variance 6:- Standard hours for actual production.
Solution:
Sl. No.
Statement of Required Information

Particulars Basis Amount (`)
1. 2. 3.
Overhead Expenditure Variance Actual Overhead incurred Actual Hours for Actual production
W.N. 1 W.N. 2 Actual Overhead _______________ Actual Rate (Actual hrs worked) Recvoery Rate 6,000 _____ (800 1,200) 1,200 (Standard Hr. Act. worked Hr.) R.R. (1,000 800) 5 W.N. 3
400 A. 6,400 800 hrs.
4.
Overheads Capacity Variance
2,000 (A)
5.
Overheads Efficiency Variance
6.
Standard hours for actual production
1,000 (F)
1,000 hrs.
--------------------------------------------------------------------------------------------------------------------------------------Question 34: The Dearborn Company manufactures product X in standard batches of 100 units. A standard cost system is in use. The standard costs for a batch are as follows: Raw materials Direct labour Variable overhead 60 kg @ ` 4.50/kg 36 hr @ `8.25/hour 36 hr @ `4.75/hour
` 270 ` 297 `` 171 ` 738 24,000 units
Standard output per month
Production for April 2005 amounted to 210 batches. The relevant statistics follows
The management has noted that actual costs per batch deviate somewhat from standard costs per batch. Required: Prepare a statement which will contain a detailed explanation of the dierence between the actual costs and standard costs Solution: Data for Resource Variance
Particulars Qty. Budgeted (1 FG) Rate Amount ( `) Mat (kg) Labour (hrs.) V OH (hours) 0.6 0.36 0.36 4.50 8.25 4.75 2.7 2.97 1.71 12,600 7,560 7,560 4.50 8.25 4.75 Standard (21,000) Qty. Rate Amount ( `) 56,700 62,370 35,910 13,000 7,920 7,920 4.70 8.45 4.545 Qty. Actual (21,000) Rate Amount ( `) 61,100 66,924 36,000
Sl. No.
Particulars
Statement of Variances Basis
Amount (`)
1.
Material Price Variance
(4.50 4.70) 13,000 (S.P. A.P.) A.Q. (S.Q. A.Q.) S.P. (1,26,00 13,000) 4.50 S.C. A.C. 56,700 61,100 (S.R. A.R.) Actual Working Hours (8.25 8.45) 7920 (Standard Hrs. Actual Working Hours) . S.R. (7,560 7,920) 8.25 S.C. A.C. 62,370 66,924 (S.R. A.R.) Actual Working Hours (4.75 4.545) 7,920 (Standard Hrs. Actual Working Hours) S.R. (7,560 7,920) 4.545
2,600 (A)
2.
1,800 (A)
3.
4,400 (A)
4.
Labour Rate Variance
1,584 (A)
5.
2,970 (A)
6.
Labour Cost Variance
4,554 (A)
7. 8.
Variable OH Expenditure Variance Variable OH Efficiency Variance
1,626 (F)
1,636 (A)
9.
Variable OH Cost Variance S.C. A.C. 35,910 36,000 10 (A)
--------------------------------------------------------------------------------------------------------------------------------------Question 35: A Ltd., operates a system of standard costs. Following information is available: Actual: Materials Consumed
`
1,89,000
(3,600 units at ` 52.50 per unit) Direct Wages 22,100 Fixed Expenses 1,88,000 Variable Expenses 62,000 Output during the period was 3,500 units of finished product. For the above period, the standard production capacity was 4,800 units and the break up of standard cost per unit was as under: Particulars Amount (`) Materials (one unit @ 50 per unit) 50 Direct wages 6 Fixed expenses 40 Variable expenses 20 Total standard cost per unit 116
The standard wages per unit is based on 9,600 hours for the above period at a rate of `3.00 per hour. 6,400 hours were actually worked during the above period, and in addition, wages for 400 hours were
paid to compensate for idle time due to breakdown of a machine and overall wage rate was ` 3.25 per hour. Required: Compute the following variances with appropriate workings: 1:- Direct Material Cost Variance 2:- Material Usage Variance 3:- Wage Rate Variance 4:- Idle Time Variance 5:- Fixed Expenses Expenditure Variance 6:- Fixed Expenses Capacity Variance 7:- Total Cost Variance. 8:- Material Price Variance 9:- Direct Labour Cost Variance 10:- Labour Eciency Variance 11:- Variable Expenses Variance 12:- Fixed Expenses Volume Variance 13:- Fixed Expenses Eciency Variance
Solution:
Particulars Mat (unit) Labour (hrs.) V OH (hrs.) Budgeted (1 Unit) Qty. Rate Amount (`) 1 50 50 2 3 6 2 10 20 Standard (3,500) Qty. Rate Amount (`) 3,500 50 1,75,000 7,000 3 21,000 7,000 10 70,000 Qty. 3,600 6,800 6,400 Actual (3,500) Rate Amount (`) 52.50 1,89,000 3.25 22,100 9.6875 62,000
1. Material Cost Variance S.C. A.C. 1,75,000 1,80,000 (S.R. A.R>) X AQ (50 52.50) X 3600 (S.Q. A.Q.) X S.R. (3,500 3,600) X 50 S.C. A.C. 21,000 22.100 (S.R. A.R>) X A.P. Hrs (3 3.25) X 6,800 (S.Hrs A.W. Hrs) X S.R (7,000 6,400) X 3 Idle Hrs. X S.R. (400 X 3) S.C> -A.C. 70,000 62,000 Budget Actual 1,92,000 1,88,000 Recovered Budget 1,40,000 1,92,000 (A. W. HRs Bud.. Hrs) X R.R. (6,400 9,600) X 20 (S.Hrs-A.W.Hrs)X R.R. (7,000 6,400) X 20 1400 (A)
2.
Material price Variance
9000 (A)
3.
Material usage Variance
5,000 (A)
4.
Labour Cost Variacne
1,100 (A)
5.
Wage Rate Variance
1,700 (A)
6.
1,800 (F)
7. 8.
Idle time Variance Variable Expenses Variances
1,200 (A)
8000 (F)
9 10
Fix OH Expenditure Variance FIx OH Volumne Variance
4000(F) 52,000(A) 64,000 (A) 12,000(F)
11 12 13.
Fixed Exp.(OH) Capacity Variance Fixed Expenses(OH) Efficiency Variance Total Cost Variance
--------------------------------------------------------------------------------------------------------------------------------------Question 36: Z Ltd uses standard costing system in manufacturing of its single product M. The standard cost per unit of M is as follows:
`
Direct materials: 2 m @ ` 6 per m Direct labour: 1 hour @ ` 4.40 per hour Variable overhead: 1 hour @ ` 3 per hour 12.00 4.40 3.00
19.40
During July, 1993, 6000 units of M were produced and the related data are as under: Direct material acquired 19000 m @ `5.70 per m.
`
Material consumed 12670 m.
Direct labour - ? Hours@ ` ? per hour Variable overheads incurred
27,950 20,475
The variable overheads efficiency variance is ` 1,500 adverse. Variable overheads are based on direct labour hours. There was no stock of raw material in the beginning. Required: Compute the missing gures and work out all the relevant variance.
Solution:
Budgeted (1 FG) Qty. Mat (Meter) Labour (hrs.) V OH (hrs.) 2 1 1 Rate 6 4.40 3 Amount (`) 12 4.40 3 Qty. 12,000 6,000 6,000 Standard (6,000) Rate 6 4.40 3 Amount (`) 72,000 26,400 18,000 Qty. 12,670 6,500 (W.N. 1) 6,500 (W.N. 1) Actual Rate 5.70 4.3 3.15 Amount (`) 72,215 27,950 20,475
1. Material Price Variance (S.R>- A.R>) X A.Q. (6 5.70) X 12,670 (S.R> - A.R> ) X A.Pay Hr (4.40 4.30) X 6,500 (S.R> -A.R.) X A.W. Hr (3 3.15 ) X 6,500 4,020(A) 4. Material Usage Variance (S.Q. A.Q>) X S.R. (12,000 12,670) X 6 2,200(A) 5. Labour Efficiency Variance (S. HR A.W.Hr ) X S.R. (6,000 6,500) X 4.40 1,500(A) 6. VOH Efficiency Variance (S. Hr A.W. Hr ) X S.R. (6,000 6,500) X3 215(A) 7. 8. Material Cost Variance Labour Cost Variance S.C. A.C. 26,400 27, 950 S.C A.C. 18,000 20,475 S.C. A.C. 72,000 72,215 1,550(A) 3,801 (F)
2.
Labour Rate Variance
650 (F) 975 (A)
3.
Variable OH Expenditure Variance
9.
Variable OH Cost Variance
2,475(A)
Working Notes: 1. Calculation of Actual Working Hours

Variable OH Efficiency variable = (S. Hr. A.W.Hr) S.R. 1,500 = (6,000 A.W.Hr) 3 500 = 6,000 A.W.Hr Actual working hour = 6,000 + 500 = 6,500 Hrs. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Question 37:- Mr M provide the following information relating to 1,000 units of product ZED during the
month of April, 1993: Standard price per kg of raw-material Actual total direct material cost Standard direct labour hours Actual direct labour hours Total standard direct labour cost Standard variable overhead per direct labour hour Standard variable overhead per unit of ZED Total standard variable overhead Actual total variable overheads
`3 ` 10,000
1,600 1,800
` 8,000 `1 ` 1.60 `1,600 `1,620
The material usage variance is ` 600 adverse and the overall cost variance per unit of ZED is ` 0.07 adverse as compared to the total standard cost per unit of ZED of ` 21.
Required:
Compute the following Standard quantity of raw material per unit of ZED. Standard direct labour rate per hour. Standard direct material cost per unit of ZED. Standard direct labour cost per unit of ZED. Standard total material cost for the output. Actual total direct labour cost for the output. Material price variance. Labour rate variance. Labour eciency variance. Variable overhead expenditure variance. Variable overheads eciency variance.
Note: Key calculation should form part of the answer.

= 6,500 Hr.
Solution:S.No. A B C D E F G H I J
Statement of Missing Variances

Basis 3,800/1.00 in (W.N.1) 8,000/1,600(W.N.1) 11,400/1,000 (W.N. 1) 8,000/1,000(W.N. 1) W.N.-1 W.N.- 1 (S.R A.R.) X AQ (3 2.5 ) X 4000 (S.R. -A.R.) X A. Day. Hrs ( 5 5.25 ) X 1,800 S. Hrs A.W. Hrs ) X S.R. (1,600- 1,800) X5 (S.R. A.R.) X A. W. Hrs. Amount 3.8 Kg 5.00 11.40 8 11,400 9,450 2000(F) 450(A) 1,000(A) 180(F)
Particulars Standard Quantity of Raw Material/unit Standard Direct Labour Rate/Hour Standard Direct Material Cost/unit Standard Direct Labour Cost/unit of Z.E.D. Standard total material cost for the output Actual Total Direct labour cost for output Material Price Variance LAbour Rate Variance Labour efficiency variance Varaicne OH Expenditure Variance
Variable OH Efficiency variance
( 1 0.90) X 1800 (S. Hrs A.W. Hrs) X S.R. 1600 1800) X1
200(A)
Working Notes: 1. Data for Resource Variance

Standard/Budget (1,000 FG) Qty. Rate Amount Cost per Unit ( `) Material Labour hours Variable overhead hours 3,800 1,600 1,600 3 5 1 11,400 8,000 1,600 11.4 (B.f.) 8 1.6 21 4,000 (W.N. 2) 1,800 1,800 2.5 5.25 0.90 Qty. Actual (1,000 FG) Rate Amount ( `) 10,000 9,450 1,620 10 9.45 (B.f ) 1.62 21.07(W.N.3) Cost per unit
2. Material Usage Variance= (S.Q. A.Q.) S.R. 600 = (3,800 A.Q.) 3 200 = 3,800 A.Q. A.Q. = 3,800 + 200 = 4,000 kg 3. Over all cost variance = S.C. A.C. 0.07 = 21 A.C. Actual cost = 21 + 0.07 = ` 21.07 --------------------------------------------------------------------------------------------------------------------------------------Question 39: K Limited uses standard costs and flexible budgets for control purposes. The following information is given: 1. Standard and budgeted data The standard material allowed per unit is 4 kg at a standard price of ` 0.75 per kg. Budgeted direct labour hours for a four week period were 80,000 hours at a budgeted cost of ` 1,52,000. Budgeted variable production overhead for 80,000 hours was ` 96,000. 2. Details for four-week period ended 29th April 1988 were: Incurred: Direct wages
`
1,63,800
Variances:
Direct wages rate, `0.20 per hour adverse. Direct Materials price (Calculated on purchases at time of receipt at Re. 0.05 per kilogram) ` 9,000 favourable. Direct material usage ` 1,500 adverse. Variable production overhead ` 2,200 favourable. Variable production overhead efficiency ` 2,400 adverse, Production 38,000 units. There were no stocks at beginning of period, but there were 26,000 kg of direct materials in stock at 29th April 1988.
Required: State for the period

The number of kilograms of direct material purchased. The number of kilograms of direct material used above the standard allowed. The variable production overhead expenditure variance. The actual hours worked. The number of standard hours allowed for the production achieved.
Solution:
Budgeted Qty. Material Labour Variable overhead 4 2 2 Rate 0.75 1.9 1.2
Data for Variance

Standard Qty. 1,78,000 76,000 76,000 Rate 0.75 1.9 1.2 Amount ( `) 3 3.8 2.4 1,33,500 1,44,400 91,200 1,54,000 78,000 78,000 0.7 2.1 1.141 Qty. ( `) Actual Rate Amount ( `` ) 1,07,800 1,63,800 89,000 Amount
Statement of Required Information

Sl. 1. 2. 3. 4. 5. Particulars Number of kilogram of direct material purchases The number of kilograms of direct material used above the standard allowed The variable production overhead expenditure variance The Actual Hours Worked The number of standard hours allowed for the production achieved Basis Amount (W.N. 1) 1,80,000 kg (W.N. 3) 2,000 kg (W.N. 4) 4,600 (F) (W.N. 1) 78,000 Hrs. (W.N. 5) 76,000 Hrs.
Variable overhead cost

Variance = SC AC 2,200 = 91,200 78,000 AR 9,12,000 2,200 78,000 Working Notes: 1. Calculation of Actual Hours
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Question 41: On 1st April, 1998, ZED company began the manufacture of a new electronic gadget. The
company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of the product are as under: (`)
Direct Material (3 kg at ` 5 per kg) Direct Labour (0.5 hour at ` 20 per hour) Manufacturing Overhead (75% of direct labour cost) Total Cost
15.00 10.00 7.50 32.50
The following data was obtained from Zed Companys record for April 1998
Particulars Sales Sundry Creditor (For purchase of direct materials in April 1998) Direct Material Price Variance Direct Material Usage Variance Direct Labour Rate Variance Direct Labour Efficiency Variance Debit Credit ` 1,25,000 `` 68,250 3,250 2,500 1,900 2,000
The actual production in April 1998 was 4,000 units of the gadget, and the actual sales for the month was 2,500 units. The amount shown above for direct materials price variance applies to materials purchased during April 1998. There was no opening stock of raw materials on 1st April, 1998. Required: Calculate for April 1998 the following: (i) Standard direct labour hours allowed for the actual output achieved. (ii) Actual direct labour hours worked. (iii) Actual direct labour rate. (iv) Standard quantity of direct materials allowed (in kg) (v) Actual quantity of direct materials used (in kg) (vi) Actual quantity of direct materials purchased (in kg) (vii) Actual direct materials price per kg --------------------------------------------------------------------------------------------------------------------------------------Question 42: A Ltd. has a manufacturing division which makes a product to which the following details relate Particulars Per unit Materials 5 kgs at ` 2 ` 10 Direct labour 12 hours at ` 2 `24 Variable overheads 12 hours at ` 1 `12 Relevant fixed overhead are budgeted at ` 10,000 per month and planned output is 2,000 units per month. The selling price is ` 55 per unit. An incentive scheme is in operation in the division concerned, whereby employees are paid a bonus of 15% of the standard cost of materials saved and 50% of direct labour time saved values at standard direct labour hour rate. During a recent month when output was 1,800 units, the following actual results were recorded:
Particulars Direct material used (8,500 kg) Direct wages (20,000 hours) Variable Overhead Fixed overhead Net profit Sales
Amount (`) 17,200 42,000 22,000 9,800 91,000 4,000 95,000
Required:
(a) Calculate the variance, which occurred during the month. (b) Calculate the total bonus payments to employees in the division.
Solution: Calculation of Different Variances

Sl. 1. 2. 3. 4. 5. 6. 7. 8. Particulars Material Price Variance Material Usage Variance Material Cost Variance Labour Rate Variance Labour Efficiency Variance Labour Cost Variance Basis (S.R. A.R.) A.Q. (2 2.0235) 8,500 (S.Q. A.Q.) S.R. (9,000 8,500) 2 S.C. A.C. (18,000 17,200) (S.R. A.R.) Actual Payment Hours (2 2.1) 20,000 (S.Hr Actual Working Hours) S.R. (21,600 20,000) 2 S.C. A.C. 43,200 42,000 Amount 200 (A) 1,000 (F) 800 (F) 2,000 (A) 3,200 (F) 1,200 (F) 2,000 (A) 1,600 (F)
V OH Expenditure variance (S.R. A.R.) Actual Working Hours (1 1.1) 20,000 Variable OH Efficiency variance (Standard Working Hours Actual Working Hours) S.R. (21,600 20,000) 1 S.C. A.C. (21,600 22,000)
9. 10. 11. 12.
Variable overhead cost variance
400 (A) 200 (F) 1,000 (A) 800 (A)
Fixed overhead expenditure Budgeted Actual variance (10,000 9,800) Fixed overhead volume variance Fixed overhead cost variance Recovered Budgeted (9,000 10,000) Recovered Actual (9,000 9,800)
(b) Statement of Bonus

Particulars (i) 15% of S.C. of Material saved (S.Q. A.Q) S.C. 15% (9,000 8,500) 2 15% (ii) 50% of S.C. of lab. Hrs. saved 50% 2 (21,600 20,000) Total Bonus payable Working Notes: Amount (`)
150 1,600 1,750
Data for Resource Variances

Budgeted Output 2,000 units or 24,000 hrs. Standard hrs./units 21,600 Hrs or 1,800 units Recovery Rate
` 5 / unit
or
Budgeted fixed-overhead 10,000
Actual Hrs. 20,000
`` 0.4167 / hr.
Recovered (`) 9,000 (21,600 0.4167) Actual (`) 9,800
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Question43: A company manufactures two products X and Y. Product X requires 8 hours to produce while Y requires12 hours. In April, 2004, of 22 effective working days of 8 hours a day, 1,200 units of X and 800 units of Y were produced. The company employs 100 workers in production department to produce X and Y. The budgeted labour hours are 1,86,000 for the year.
Required:
Calculate Capacity, Activity and Eciency ratio and establish their relationship.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Question 45: The following is the information provided by Tulsian Ltd.

Product Budgeted Sales Quantity Units Budgeted Selling Price per unit 20 10 Standard Cost Per unit ( `) 15 4 44 66 Actual Sales Quantity Units Actual Selling Price per unit ( `) 25 5 Actual Cost Per unit (` 16 5
A B
60 40
Required:
1. Calculate all the sales variances (a) on sales value basis (b) on sales margin value basis 2. Reconcile the standard prot with actual prot.
Solution:
Data for Sales Variance

Budgeted Sale Standard Ratio for actual mix Qty. Actual Sale Rate Amount (`)
Product
Qty.
Rate
Amount (`)
A B
60 40
20 10
1,200 400 1,600
66 44 110
44 66
25 5
1,100 330 1,430 Amount 170 (A)
Statement of Sales Variances

Sl. 1. 2. Particulars Sales Value Variance Sales Price Variance Basis Budgeted Sales Actual Sales (1,600 1,430) (B.S.P.A.S.P.) A.Q. A : (20 25) 44 = 220 (F) B : (10 5) 66 = 330 (A) (B.Q. A.Q) B.S.P. A : (60 44) 20 = 320 (A) B : (40 66) 10 = 260 (F) (S.R. for Actual Mix Actual Ratio for Act Mix) B.S.P. A : (66 44) 20 = 440 (A) B : (44 66) 10 = 220 (F) (S.R. for Bud. Mix Standard Ratio for T.A. Mix.) B.S.P. A : (60 66) 20 = 120 (F) B : (40 44) 10 = 40 (F)
110 (A)
3.
Sales Volume Variance
60 (A)
4.
Sales Mix Variance
220 (A)
5.
Sales Yield Variance
160 (F)
Reconciliation Statement
Budgeted profit 540 110 (A) 60 (A) 26 (F) 396
Adjust Sales Variance:

Sales price variance Sales Volume Variance
Adjust cost variances:

(1060 1034) Actual profit
Working Notes: 1. Statement of Profit

Budget Sales Value A: 60 20 B: 40 10 Sales Value A: 60 20 B: 40 10 Less: Cost A: 60 15 Sales Value 1,200 400 900 160 1,600 (1,060) 1,600 (1,060) Sales Value A: 44 25 B: 66 5 Sales Value A: 44 25 B: 66 5 Less: Cost A: 44 16 Sales Value Actual 1,100 330 704 330 1,430 (1,034) 1,430 (1,034)
540
396
Subject to Checking --------------------------------------------------------------------------------------------------------------------------------------Question 47: Stand Cost Corporation produces three products: A, B and C. The master budget called for the sale
of 10,000 units of A at ` 12. 6000 units of B at ` 15 and 8,000 units of C at `9. In addition, the standard variable cost for each product was ` 7 for A, `` 9 for B and ` 6 for C. In fact, the firm actually produced and sold 11,000 units of A at ` 11.50, 5,000 units of B at ` 15.1and 9,000 units of C at ` 8.5.The firm uses two input to produce each of the products X and Y. The standard price per unit of material X is ` 2 and for a unit of material Y is ` 1. The materials budgeted to be used for each product were: Products Materials X Units Y Units A 2 3 B 4 1 C 1 4 The firm actually used 54,000 units of X at a cost of ` 1,09,620 and 72,000 units of Y at a cost of ` 73,000.
Required:
Determine the mix, quantity and rate variances for sales as well as the yield, mix and price variance for materials.
Solution:
Sales Variances (Sale Value Method)
Budgeted Sales Product A B C Qty. Units 10,000 6,000 8,000 24,000 Rate (`) 12 15 9 Amount(`) 1,20,000 90,000 72,000 2,82,000 Oty. Units 11,000 5,000 9,000 25,000 Rate (`) 11.50 15.10 8.55 Actual Sales Amount ` 1,26,500 75,500 76,950 2,78,950 Actual Quantity Budgeted Price 1,32,000 75,000 81,000 2,88,000
Alternative Solution (Sales Margin Method) Basic Calculation

Budgeted Margin Product A B C Qty. Units 10,000 6,000 8,000 24,000 Qty. Units 11,000 5,000 9,000 25,000 Actual Margin Actual Quantity X Budgeted Price (``) Rate (`) 5 6 3 Amount (`) 50,000 36,000 24,000 1,10,000 Rate (`) 4.50 6.10 2.55 Amount (``) 49,500 30,500 22,950 1,02,950 55,000 30,000 27,000 1,12,000
Material Variances: Basic Calculations

Standard and actual costs of material for actual output i.e. 11,000 untis of A, 5,000 units of B and 9,000 untis of C and standard cost of actual input material.
Material Qty Units X Y 51,000 74,000 1,25,000 Standard Cost Actual Cost Qty. Units 54,000 72,000 1,26,000 Actual quantity Standard price Rate Amount (`) 1,08,000 72,000 1,80,000
Rate (`) 2 1
Amount (`) 1,02,000 74,000 1,76,000
Amount (`) 1,09,620 73,000 1,82,620
--------------------------------------------------------------------------------------------------------------------------------------Question 50: File and Smile Associates undertake to prepare income tax returns for individual for a fee. Their advice to their clients is to pay the proper tax and relax. In order to arrive at the proper scales of fees and assess their own performance, they have a good system. They use the weighted average method and actual costs for financial reporting purposes. However, for internal reporting they use a standard cost system. The standards on equivalent performance have been established as follows: Labour per return Overhead per return 5 hrs @ ` 40 per hour 5 hrs @ ` 20 per hour
For March 1988 performance, budgeted overhead is ` 98,000 for the standard labour hours allowed. The following additional information pertains to the month of March 1988.
Required: Compute (a) For each cost element equivalent units of performance and the actual cost per equivalent unit. (b) Actual cost of return in process on March 31. (c) The standard cost per return and (d) The total labour rate and labour eciency variance as well as total overhead volume and overhead budget variances.
Solution: (a) Statement of Cost (Weighted Avg.)

Labour Current Opening Cost Total Qty. (WN1) (B) Rate (` p.u) (A) (B) Overhead
`1,78,000 ` 12,000 ` 1,90,000

1,000
` 90,000 `5,000 ` 95,000

1,000
` 190
19,000 9,500 28,500
` 95
(a) Calculation of Actual cost of closing W.I.P.

Labour (190 100) Overhead (95 100) (b) Labour: 5 Hrs X 40 Overhad: 5 hHR X 20
Standard Cost
200 100 300
(d) Statement of Variances

Sl. No. Particulars 1. Labour Rate Variance Basis (S.R. A.R.) Actual Payment Hrs 1,78,000 40 4,000 4,000 (S.Hr A.W. Hr) S.R. (4,750 4,000) 40 Recovered overhead Budget overhead 95,000 98,000 Budget overhead Actual overhead 98,000 90,000 Figures 18,000 (A)
2. 3.
Labour Efficiency Variance Overhead Volume Variance
30,000 (A)
3,000 (A) 8,000 (F)
4.
Overhead Budget/Expenditure Variance
Working Notes:
1. Statement of Equivalent Production (Weighted Avg. Method)
Particulars Opening W.I.P. Units Started 200 Transferred 825 Closing W.I.P. (80%) 1,025 900 125 1,025 Labour 900 100 1000 Overhead 900 100 1000
Statement of Equivalent Production (FIFO) for Variance Analysis

Labour Opening W.I.P. (25 k) Units Started 200 Opening W.I.P. Current 825 Transferred Closing W.I.P. (80%) 1,025 200 700 900 125 1,025 150 700 100 950 Overhead 150 700 100 950
-----------------------------------------------------------------------------------------------------------------------------Question 51: (Standard Process Costing including Reconciliation Equivalent production FIFO method): A processing company uses Standard Process Costing method. The standard process cost card is as follows:
Stocks:
Opening W.I.P. 250 kg Degree of completion: Material-100% Labour and overhead 60%. Closing W.I.P 450 kgs. Degree of completion: Material-100%, Labour and overheads 20% . Finished Stock-1,200 kgs. The company uses FIFO method for valuation of stocks.
Required:
Computation of cost variances in as much detail as possible and process Cost Reconciliation statement.

S.NO. Particulars
1 2 3 4 5 6 7 8 9 10 11 Material Price Variance Material usage variance Material cost variance Labour Rate variance Labour Efficiency variance Labour cost variance Fixed overhead volume variance Fixed overhead efficiency variance Fixed overhead capacity variance Fixed overhead expense variance Fixed OH Cost variance
Basis
(S.P. A.P. ) X A.Q. (10 11.034) X 2900 (S.Q. A.Q.) X S.R. (2800 2900) X 10 S.C.- A.C. 28,000 32,000 (S.R. A.R.) X A.pay. HRs ( 20 20,606) X 3300 (S. Hrs- a.W.Hour) X S.R. (3,420 3,300) X 20 S.C. A.C. 68,400 68,000 Recovered Budget 1,02,600 90,000 (S. Hr. A.W. Hr.) X S.R. (3,420- 3,300) X30 (A.W> Hr Bud. Hr) X R.R. (3,300 3,000) X 30 Budget Actual 90,000 88000 Recovered Actual 1,02,600 88,000
`
3000(A) 1000(A) 4000(A) 2000(A) 2400(F) 400(F) 12,600 (F) 3600 (F) 9000 (F) 2000 (F) 14,600 (F)
Working Note 1
Statement of Equivalent Production (FIFO)
Material OP. W.I.P. (100%, 60%) 250 Opening 250 Introduced 1,400 Current 950 Transferred 1,200 Closing W.I.P. (80%) 450 1,650 1,650 950 450 90 1,400 1,140 (Actual output for material) (Actual output for labour) Labour & Overhead 100 950
Working Note 2 Data for Resource Variance

Qty. Material (kg) (1,400) Labour (1,140) 2,800 3,420 Standard Rate Amount 10 20 (`) 28,000 68,400 Qty. 2,900 3,300 Actual Rate 11.034 20.60 Amount (`) 32,000 68,000
Working Note 3
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Question 52: A single product company has prepared the following cost sheet based on 8,000 units of output
per month: Direct Materials 1.5 kg @ ` 24 per kg Direct Labour 3 hrs @ ` 4 per hr Factory Overheads Total
`
36.00 12.00
12.00 60.00 The flexible budget for factory overheads is as under:
The actual results for the month of October 2002 are given below: Direct Materials Purchased and consumed were 11,224 kg at ` 2,66,570. Direct Labour hours worked were 22,400 and Direct Wages paid amounted to ` 96,320. Factory overheads incurred amounted to ` 96,440 out of which the variable overhead is ` 2.60 per Direct Labour hour worked. Actual output is 7,620 units. Work-in-process: Opening WIP 300 units Materials 100% complete Labour and Overheads 60% complete Closing WIP 200 units Materials 50% complete Labour and Overhead 40% complete
Required: Analyze the variances

Sl. No. Particulars 1. Material Price Variance Basis (S.P. A.P.) A.Q. (24 23.75) 11,224 (S.Q. A.Q.) S.P. (11,130 11,224) 24 S.C. A.C. 2,67,120 2,66,570 Figures 2,806 (F)
2.
2,256 (A)
3.
550 (F)
4.
Variable Overhead Expenditure Variance (S.R. A.R.) A.W.Hr (2.4 2.6) 22,400 Variable Overhead Efficiency Variance (S.Hr A.W.Hr) S.R. (22,560 22,400) 2.4 Budget Actual 38,400 38,200 Recovered Budget 36,096 38,200 (S.Hr A.W.Hr) S.R. (22,560 22,400) 1.6 (Bud. Hr. A.W.Hr) S.R. (24,000 22,400) 1.6 (S.R. A.R.) A.Pay. Hrs (4 4.3) 22,400 (S.Hr A.W.Hr) S.R. (22,560 22,400) 4
4,480 (A)
5.
384 (F)
6.
Fixed overhead expenditure variance
200 (F)
7.
Fixed overhead volume variance
2,304 (A)
8.
Fixed overhead efficiency variance
256 (F)
9.
Fixed overhead capacity variance
2,560 (A)
10.
Labour rate variance
6,720 (A)
11.
Labour efficiency variance
640 (F)
Working Note 1
Calculation of Variable Overhead Rate per unit Change in overhead 92,400 81,000 10,800 Change in output 7,500 6,000 1,500
Working Note 2 Statement of Equivalent Production

Particulars Material Lab OH
Opening W.I.P. (100%, 60%) Introduced (B.f )
300 7,520 7,820
Opening Current Transferred Closing W.I.P. (50%, 40%)
300 7,320 7,620 200 7,820
7,320 100 7,420
120 7,320 80 7,520
Working Note 3 Data for Resource Variance

Particulars Qty. Material Labour Variable overhead 7,420 1.5 = 11,130 7,520 3 = 22,560 7,520 3 = 22,560 Standard Rate 24 4 7.2 = 2.4 3 Amount (`) 2,67,120 90,240 54,144 Qty. 11,224 22,400 22,400 Actual Rate Amount (`) 23.75 4.3 2.60 2,66,570 96,320 58,240
--------------------------------------------------------------------------------------------------------------------------------------Question 53: Standard cost sheet per unit of output is as under Direct material 3 Pcs. @ ` 2.15 Direct labour: Department A 2 hrs @ ` 1.75 Department B 4 hrs @ ` 1.50 Overheads: Department A 2 hrs @ ` 0.50 Department B 4 hrs @ ` 1.00 Total Transactions for the period are as under: Materials purchased and consumed: 1.00 4.00 3.50 6.00
`6.45
` 9.50 ` 5.00 `20.95
8,600 pcs. @ `2.50 each Labour Time Spent Department A. 5,200 hours Department B. 12,000 hours There is no change in labour rates: Actual factory overheads are: Department A` 3,000 Department B. ` 12,500 Units produced: Department A. 2,800 Department B. 2,800 Budgeted overheads: Department A. ` 3,000 Department B. ` 12,000 Pass the necessary Journal Entries to record the above transactions under single plan.
Required:
Show the Standard Cost Card. (b) Show the journal entries to record the transactions and disposal of the variances Narrations are not required for journal entries). Show (i) The Material Control Account (ii) The Work-in-progress Control Account.
Solution:
1. Material Control A/C Material Price Variance A/c To creditors A/c (Being Material purchased) Creditors A/c To Bank
Journal Entry (Under Single Plan) in Department A Particulars Amount (``) Amount (`)
Dr (S.R. A.Q) Dr (S.R. A.R.) A.Q. 18,490 3,010 21,500 Dr Dr (S.Q. A.R.) (S.Q. A.Q.) A.R. (A.Q. A.R.) Dr (S.R. A.W.Hr) (S.R. A.P.Hr) Dr Dr. 21,500 21,500 18,060 430 18,490 9,100 9,100 9,100 9,100 9,800 9,100 700 Dr Dr 2,800 200 3,000
2. 3.
W.I.P. Control A/c Material Usage Variance A/c. To Material control A/c. (Being goods issued to production) Wages Control A/c. To wages payable A/c. (Being labour expenses due) Wages payable A/c. To Bank A/c W.I.P. control A/c To wages control A/c To labour Efficiency variance A/c W.I.P. Control A/c Overhead cost variance A/c To Bank
4.
5. 6.
7.
8.
Department B A/c To W.I.P. Control A/c
Dr
30,660 30,660
(Being balance of W.I.P. Control A/c of department A transferred to department B)
In Department B Journal Entry Particulars Amount (`) Amount (`)

1. W.I.P. Control A/c To Department A A/c. 2. Wages Control A/c Labour Rate variance A/c To wages payable A/c 3. Wages Payable A/c To Bank 4. W.I.P. control A/c Labour Efficiency variance A/c To wages control A/c 5. W.I.P. control A/c Overhead cost variance A/c To Bank Dr Dr Dr 30,660 30,660 18,000 Nil 18,000 Dr Dr Dr 18,000 18,000 16,800 1,200 18,000 Dr Dr 11,200 1,300 12,500
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RECONCILIATION BASED QUESTION Question 56: The budget output of a single product manufacturing company for 1984 85 was 5,000 units. The
financial results in respect of the actual out put of 4,800 units achieved during the year were as under: Particulars Direct material Direct wages Variable overheads Fixed overheads Profit Sales cost accounts recorded the following variances for the year: Variances Favourable (`) Amount (`) 29,700 44,700 72,750 39,000 36,600 2,22,750
The standard wage rate is `4.50 per hour and the standard variable overhead rate is `7.50 per hour. The Adverse (`)
Material Price Material usage Wage Rate Labour Efficiency Variable Overhead Expenses Variable Overhead Efficiency Fixed Overhead Expense Selling Price
750 3,000 6,750
300 600 2,250 3,750 1,500
Required:
Prepare a statement showing the original budget. Prepare the standard product cost sheet per unit. Prepare a statement showing the reconciliation of originally budgeted prot and the actual prot.
Solution: Statement showing standard cost sheet per unit and Original Budget
Particulars Material (See WN 1) Labour (See WN 2) Variable overhead (See WN 3) Fixed overhead (See WN 4) Total Cost Profit Selling price (See WN 5) Standard cost per unit (`) 6 9 15 7.5 37.5 7.5 45 Original Budget (`) 5,000 units 30,000 45,000 75,000 37,500 1,87,500 37,500 2,25,000
Statement of Reconciliation (Marginal)

Particulars Budgeted Profit Sales Variance: Price Variance Volume Variance: Cost Variances: Material Cost Variance: Amount (`) 37,500 6,750 (F) 3,000 (A)
(B.Q. A.Q.) (F.C. + Pro. P.U.) 200 (7.5 + 7.5)
Material price variance 300 (A) Material usage variance 600 (A) Labour Cost Variance: Wage rate variance 750 (F) Labour efficiency variance 2,250 (A) Variable Overhead Cost Variance: Variable overhead expenses 3,000 (F) Variable overhead efficiency variance 3750 (A) Fixed Overhead Expenditure Variance Fixed Overhead Volume Variance
900 (A) 1,500 (A) 750 (A) 1,500 (A) N.A.
Actual profit
36,600
Quantity Selling Price per unit Variable cost per unit (Material + Labour + Overhead) Contribution per unit Total Contribution Less: Fixed Cost Profit
Budget 5,000 45 30 15 75,000 37,500 37,500
Actual 4,800 45 30 15 72,000 37,500 34,500
------------------------------------------------------------------------------------------------------------------------------------------------------Question 57: The Summarised results of a company for the two years ended December 31st are given below for 2 years: (` in lakh) (` in lakh) Sales 770 600 Direct Material 324 300 Direct wages 137 120 Variable Overheads 69 60 Fixed Overheads 150 80 Profit 90 40 As a result of re-organization of production methods and extensive campaigning, the company was able to secure an increase in the selling Price by 10% during year 2 as compared to the previous year. In year 1, the company consumed 1,20,000 kg. of raw materials and used 24,00,000 hours of direct labour. In year 2, the corresponding figures were 1,35,000 kg. of raw material and 26,00,000 hours of direct labour. Use the information given for the year 1 as the base year information to analyse the results of year 2 and to show, in a form suitable to the management, the amount each factor has contributed by way of price, usage, and volume to the change in profit in year 2.
Solution: Let Selling Price be `100 per unit for I year. Then
Sales Sales Price Quantity Sold IInd year 7,70,00,000 110 7,00,000 Ist Year 6,00,00,000 100 6,00,000
Reconciliation Statement
Particulars
Budgeted Profit Sales Variance
Basis
` in lakh 40
Price Variance = (B.S.P. A.S.P.) A. Qty = (100 110) 7,00,000 Volume Variance = (B.Q. A.Q.) Budgeted Price p.u. = (6,00,000 7,00,000) 6.6666 Fixed Overhead Volume Variance Recovered Overhead Budgeted Overhead (93.33 80) Fixed Overhead Expenditure Variance (Budgeted Overhead Actual Overhead) Material Price Variance = (S.R. A.R.) A.Q. Material Usage Variance = (S.Q. A.Q.) S.R. Labour Rate Variance = (S.R. A.R.) A.P. Hr. Labour Efficiency Variance = (S.Hr A. Hr) S.R. Variable Overhead Expenditure Variance = (S.R. A.R.) A.W. Hr Variable Overhead Efficiency Variance = (S.Hr A. Hr) S.R. Actual Profit
70 (F) 6.66 (F)
Cost Variance
13.33 (F) 70 (A) 13.5 (F) 12.5 (F) 7 (A) 10 (F) 4 (A) 5 (F) 90

Material Material Labour Variable Overhead Budget Qty. Rate (` in lakh) Amount 1,20,000 250 300 24,00,000 5 120 24,00,000 2.5 60 Qty. Standard Rate (` in lakh) Amount 350 140 70 Actual Qty. Rate (` in lakh) Amount 1,35,000 240 324 26,00,000 5.269 137 26,00,000 2.65 69
1,40,000 250 28,00,000 5 28,00,000 2.5
480
540
530
----------------------------------------------------------------------------------------------------------------------------------------Question 63: The Britten Co. Ltd manufactures a variety of products of basically similar composition. Subjecting the various raw materials to a number of standardised operations each major series of operations being carried out in a different department carries out Production. All products are subjected to the same initial processing which is carried out in departments A, B and C; the order and extent of further processing then depending upon the type of end product to be produced. It has been decided that a standard costing system could be usefully employed within Britten and a pilot scheme is to be operated for six months based initially only on department B, the second department in the initial common series of operations. If the pilot scheme produces useful results then a management accountant will be employed and the system would be incorporated as appropriate throughout the whole firm.
The standard cost per unit of output of department B is:

Particulars Direct labour (14 hours at ` 2 per hour) Direct materials: 1. Output of department A (3 kg at ` 9 per kg) 2. Acquired by and directly input to department B material (4 kg at ` 5 per kg.) Variable overhead (at ` 1 per direct labour hour worked) Fixed production overheads: 1. Directly incurred by department B (note1) manufacturing overhead (per unit) 2. Allocated to department B general factory overhead (per unit) Standard cost per unit Amount Amount 28
27 20
47 14
3 8
11
` 100
In the first month of operation of the pilot study (month 7 of the financial year), department B had no work in progress at the beginning and the end of the month. The actual costs allocated to department B in the first month of operation were:
Particulars Direct labour (6500 hours) Direct materials: I. Output of Department A (1400 Kg) (Note 2) II. Material X (1900 Kg.) Variable overheads Fixed overheads 1. Directly incurred manufacturing overhead 2. Allocated to department B (Note 3)
`
14,000
21,000 11,500 1,600 2,900 32,500 8,000 4,500 59,000
Note 1: Based on normal monthly production of 400 units Note 2: Actual cost of output of department A. Note 3: Based and allocated to departments in accordance with labour hours worked. The production manager feels that the actual costs of $59,000 for production of 500 units indicates considerable inefficiency on the part of department B. He says, I was right to request that the pilot standard costing system be carried out in department B as I have suspected that they are inefficient and careless this overspending of $9,000 proves I am right.
Required:
(a) Prepare a brief statement which clearly indicates the reasons for the performance of department B and the extent to which that performance is attributable to department B. The statement should utilize variance analysis to the extent it is applicable and relevant. (b) Comment on the way the pilot standard costing system is currently being operated and suggest how its operation might be improved during the study period.
Solution: Data for Resource Variance

Material Qty.
Output of A X Material Labour Hr. Variable OH 1,500 2,000 7,000 7,000
Standard Rate
9 5 2 1
Amount
13,500 10,000 14,000 7,000 44,500
Qty.
1,400 1,900 6,500 6,500
Actual Rate
15 6.05 2.1538 1.2308
Amount
21,000 11,500 14,000 8,000 54,500
(a) Statement of performance

Standard Cost Controllable Variances: Material Usage Variance = (S.Q. A.Q.) A.R. A (1,500 1,400) 9 = 900 (F) B (2,000 1,900) 5 = 500 (F) Labour Efficiency Variance = (S. Hr A.W. Hr) S.R. (7,000 6,500) 2 = 1000 (F) Fixed Overhead Efficiency Variance = (S. Hr A. Hr) S.R. (7,000 6,500) 0.7857 Variable OH Efficiency Variance = (S. Hr A.Q. Hr) S.R. = (7,000 6,500) 1 Uncontrollable Variances: Material Prices Variances = (S.R. A.R.) A.Q. Output of A (9 15) 1,400 = 8,400 (A) Material X (5 6.05) 1,900 = 2,000 (A) Labour Rate Variance = (2 2.1538) 6,500 Variable overhead Expenses Variance = (1 1.2308) 6,500 Fixed Overhead Expenses Variance = (4,400 4,500) Fixed Overhead Capacity Variance = (6,500 5,600) 0.7857 Amount (`) 50,000 1,400 (F)
1,000 (F)
393 (F) 500 (F)
10,400 (A) 1,000 (A) 1,500 (A) 100 (A) 707 (F)
Actual Cost 59,000 Comment: It is better to apply the technique of standard witting not only on department B but also on other department (i.e. within the company). ---------------------------------------------------------------------------------------------------------------------------------------
PLANNING AND OPERATING VARIANCE Question 65: ABC Ltd produces jams and other products. The production pattern for all the products is
similar first the fruits are cooked at a low temperature and then subsequently blended with glucose syrup citric acid and pectin are added henceforth to help setting. There is huge competition in the market because of which margins are tight. The firm operates system of standard costing for each batch of jam.
The standard cost data for a batch of jam are:

Fruit extract Glucose syrup Pectin Citric acid 400 kg @ ` 1 per kg 700 kg @ ` 2 per kg 99 kg @ ` 1 per kg 1 kg @ `` 5 per kg
Labor 18 hrs. @ `2 per hour Standard processing loss 3%. As a consequence of unfavorable weather in the relevant year for the concerned crop, Normal prices in the trade were ` 2 per kg for fruit extract although good buying could achieve some, The actual price of Syrup had also gone up by 20% from Standards. This was because of increase in customer duty of Sugar. The actual results for the batch were: Fruit extract Glucose syrup Pectin Citric acid Labour Actual output was 1164 kg of jam. 428 kg @ ` 4 per kg 742 kg @ `` 5 per kg 125 kg @ ` 2 per kg 1 kg @ ` 6 per kg 20 hr @ ` 4 per hour
Required:
(a) Calculate the ingredients planning variances that are deemed uncontrollable; (b) Calculate the ingredients operating variances that are deemed controllable; (c) Calculate the mixture and yield variance; Calculate the total Variance for the batch.
Solution:
Data for Resource Variances
Material
Fruit Extract Glucose Syrup Pectin Citric Acid
Original Standard Qty. Rate (`)

400 700 99 1 1,200 18 1 2 1 5 2 400 1,400 99 5 1,904 36 1,940
Revised Standard Qty. Rate ( `)

400 700 99 1 1,200 18 2 24 1 5 2 800 1,680 99 5 2,584 36 2,620
Qty.
428 742 125 1 1296 20
Actual Rate (`)

4 5 2 6 4 1,712 3,710 250 6 5,678 80 5,758
Labour
(a) Statement of Uncontrollable Planning Variances

Ingredients Traditional Variance Planning Variances (Original Actual) (Original Standard Revi. Stan.) Operating Variances (Revised Stand Actual)
Price Variance Fruit Extract (D.M.) Glucose Syrup Pecting Citric Acid Labour Variance
400 1,712 = 1,312 (A) 1,400 3,710 = 2,310 (A) 99 250 = 151 (A) 5 6 = 1 (A) 35 80 = 45 (A)
400 800 = 400 (A) 1,400 1,680 = 280 (A) 99 99 = NIL 5 5 = NIL 36 36 = NIL
800 1,712 = 912 (A) 1,680 3,710 = 2,030 (A) 99 250 = 151 (A) 5 6 = 1 (A) 36 80 = 44 (A)
-------------------------------------------------------------------------------------------------------------------------------------------Question66: POV Ltd uses a standard costing system to control and report upon the production of its single product. An abstract from the original standard cost card of the product is as follows:
For period 3: 2500 units were budgeted to be produced and sold but the actual production and sales were 2850 units. The following information was also available: (i) At the commencement of Period 3 the normal material became unobtainable and it was necessary to use an alternative. Unfortunately, 0.5 kg per unit extra was required and it was thought that the materials would be more difficult to work with.The price of the alternative was expected to be ` 16.50 per kg. In the event, actual usage was 12450 kg at ` 18 per kg. (ii) Weather conditions unexpectedly improved for the period with the result that a ` 0.50 per hour bad weather bonus, which had been allowedfor in the original standard, did not have to be paid.Because of the difficulties expected with the alternative material, management agreed to pay the workers ` 8per hour for period 3 only. During the period 18,800 hours were paid for. After using conventional variances for some time, POV Ltd is contemplating extending its system to include planning and operational variances. Required: (a) To prepare a statement reconciling budgeted contribution for the period with actual contribution, using conventional material and labour variances; (b) To prepare a similar reconciliation statement using planning and operational variances;
Solution: Data for Resource Variances

Original Standard Material Qty. Rate Material (kg) 2,850 4 = 11,400 Labour (hrs.) 6 2,850 = 17,100 Revised Standard Qty. 12,450 18,800 Actual Rate 18 8 ( `` ) 2,24,100 1,50,400 3,74,500 Qty. Rate (`) (`) 20 2,28,000 12,825 (2,8504.5) 16.5 2,11,612.50 7 1,19,700 17,100 6.5 1,11,150 3,47,700 3,22,762.5
(a) Statement of Reconciliation (Planning and Operating Variances)

Amount (`)
Budgeted Contribution Sales Variances Cost Volume Variance
(2,500 78) Sales Margin Price Sales Margin volume (2,500 2,850) 78 Total Planning Variance (b) Total Operating Variance (b) Actual Contribution (2,850 200 3,74,500)
1,95,000 27,300 (F) 24,937.5 (F) 51,737.5 (A) 1,95,500
PArticulars
1:- MAteiral Cost Variance 2:- Material Price Variacne 3:- Material Usage variance 4:- Labour Cost varaince 5:- Labour Rate variance 6:- Labour Efficiency Variances Total Variances
(b) Statement of Variances Traditional Variances Planning Variacnes( Operating (original Actrual original standard variances(Revised Standard) Revised standards) stand- Actual)
2,28,000-2,24,100 =3900(F) (20 -18) X 12,450 = 24,900(F) (11,400 12450) X 20 = 21,000(A) 1,19,700 1,50,400=30,700(A) (7 8) X 18,800 = 18,800(A) (17,100-18,800) X7 = 11,900(A) 29,800(A) 2,28,0002,11,612.5=16,387.5(F) (20-16.5) X 12,825 = 44,887.5(F) (11,400 12,825) X 20 = 28,500(A) 1,19,7001,11,150=8,550(F) (7 6.5) X 17,100=8,550(F) (17,100 17,100) X 7 = Nil 49,875(F) 2,11,612.52.24,100=12,487.5(A) (16.5 18) X 12,450 = 18,675(A) (12,825-12,450) X 16.5= 6,187.5(F) 1,11,150 1,50,400 = 39,250(A) (6.5-8) X 18,800=28,200(A) (17,100-18,800) X 6.5=11,050(A) 51,737.5(A)
--------------------------------------------------------------------------------------------------------------------------------------Question 68: (Growth, price-recovery, and productivity components) Oceano T-shirt company sells a variety of T-shirts. Oceano presents the following data for its first two years of operations, 2003 and 2004. for simplicity, assume that all purchasing and selling costs are included in the average cost per Tshirt and that each customer buys one T-shirt. 2003 2004 Number of T-shirts purchased 20,000 30,000 Number of T-shirts lost 400 300 Number of T-shirts sold 19,600 29,700 Average selling price `15 ` 14 Average cost per T-shirt ` 10 `9 Administrative capacity in terms of number of customers that can be served 40,000 36,000 Administrative costs `80,000 ` 68,400 Administrative cost per customer `2 ` 1,90 Administrative costs depend on the number of customers that Oceano has created capacity to support, not the actual number of customers served. Required: Calculate the growth price-recovery, and productivity components of changes in operating income between 2003 and 2004.
Solution: Balance Score Card

Last Year Profit (2003) Growth Price Productivity Current Year Profit
Revenue 2,94,000 Less: Cost Material 2,00,000 Others 80,000 Profit 14,000
A. 1,51,500 (F) B. 1,03,060.4 (A) 48,440 (F)
C. 29,700 (A) D. 30,000 (F) E. 11,600 (F) 11,900 (F)
F. 3,061 (F) 3,061 (F)
4,15,800 2,70,000 68,400 77,400
A. Revenue effect of Growth = (B.Q. A.Q.) B.S.P. = (19,600 29,700) 15 = 1,51,500 F.
B. Cost Effect of Growth

= (B.Q. A.Q.) B.V.C. = (19,600 29,700) 10.204 = 1,03,060.4 A
C. Revenue effect of price

= (B.S.P. A.S.P.) A.Q. = (15 14) 29,700 = 29,700 A.
D. Cost effect of price

M.P.V. = (S.R. A.R.) A.Q. = (10 9) 30,000 = 30,000 F
E. Cost effect of Price (Fixed)

= fixed overhead expense variance = Budget Actual = 80,000 68,400 = 11,600 F.
F. Productivity (Material Usage Variance)

= (30,306.20 30,000) 10 = 3062 F.

Qty. Material 20,000 Budget Rate 10 (`) Qty. Standard Rate 10 (`) 3,03,061 Qty. 30,000 Actual Rate 9 (`) 2,70,000
2,00,000 30,306.12
--------------------------------------------------------------------------------------------------------------------------------------Question 71: Following a strategy of product differentiation, Westwood Corporation makes a highend kitchen range hood, KE8. Westwoods data for 2005 and 2006 follow: 2005 2006
Units of KE8 produced and sold 40,000 42,000 Selling price ` 100 ` 110 Direct materials (square feet) 120,000 123,000 Direct material cost per square foot ` 10 ` 11 Manufacturing capacity for KE8 50,000 units 50,000 units Conversion costs ` 1,000,000 ` 1,100,000 Conversion cost per unit of capacity (Row 6 Row 5) ` 20 ` 22 Selling and customer-service capacity Selling and customer-service costs 30 customer 29 customer Cost per customer of selling and customer-service capacity (Row 9 ` 720,000 ` 725,000 Row 8) ` 24,000 ` 25,000 Westwood produced no defective units and reduced direct material usage per unit of KE8 in 2006. Conversion costs in each year are tied to manufacturing capacity. Selling and customer-service costs are related to the number of customers that the selling and service functions are designed to support. Westwood has 23 customers (wholesalers) in 2005 and 25 customers in 2006.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Required:
Describe briey the elements you would include in Westwoods balanced scorecard. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2005 to 2006. Suppose during 2006, the market size for high-end kitchen range hoods grew 3% in terms of number of units and all increases in market share (that is, increases in the number of units sold greater than 3%) are due to Westwoods product- differentiation strategy. Calculate how much of the change in operating income from 2005 to 2006 is due to the industry- market-size factor, cost leadership, and product differentiation. How successful has Westwood been in implementing its strategy? Explain.
Solution:
1. The balanced scorecard should describe Westwoods product-differentiation strategy. Elements that should be included in its balanced scorecard are: Financial perspective: Increase in operating income from higher margins on KE8 and from growth Customer perspective: Market share in the high-end market and customer satisfaction Internal business process perspective: Manufacturing quality, order-delivery time, on-time delivery, and new product features added, development time for new products and improvements in manufacturing processes Learning-and-growth perspective: Percentage of employees trained in process and quality management and employee satisfaction ratings.
2. Operating income for each year is:

2005 2006
Revenues (` 100 per unit 40,000 units; ` 110 per unit 42,000 units) Costs Direct material costs (` 10 per sq. ft. 120,000 sq. ft.; ` 11 per sq. ft. 123,000 sq. ft.) Conversion costs (` 20 per unit 50,000 units; ` 22 per unit 50,000 units) Selling and customer-service costs (` 24,000 per customer 30 customers; ` 25,000 per customer 29 customers) Total costs Operating income Change in operating income 1,200,000 1,000,000 720,000 2,920,000 1,353,000 1,100,000 725,000 3,178,000
` 4,000,000
` 4,620,000
` 1,080,000 `362,000 F
`1,442,000
Growth Component of Operating Income Change

Revenue effect of growth
=Actual units of output Actual units of output sold in 2005 Selling price in 2005 = (42,000 units 40,000 units) ` 100 per unit = ` 200,000 (F) Cost effect of growth for variable costs = Units of input required to produce 2006 output in 2005 Actual units of input used to produce 2005 output Input price in 2005 Cost effect of growth for direct materials =(120.000 Sq.Ft X 42,000 units 120,000Sq.Ft = `60,000 U 40,000 units = (126,000 sq. ft. 120,000 sq. ft.) ` 10 per sq. ft. = ` 60,000 U Cost effect of growth for fixed costs = Actual units of capacity in 2005 because adequate capacity exists to produce 2006 output in 2005 Actual units of capacity in 2005 Price per capacity in 2005 Cost effects of growth for fixed costs are: Conversion costs: (50,000 units 50,000 units) ` 20 per unit = ` 0 Selling and customer-service costs: (30 customers 30 customers) ` 24,000 per customer = ` 0 In summary, the net increase in operating income attributable to growth equals: Revenue effect of growth Cost effect of growth Direct material costs Conversion costs Selling and customer-service costs Change in operating income due to growth
` 60,000 (A)
0 0
` 200,000 (F)
60,000 (A)
` 140,000 (F)
Price-Recovery Component of Operating-Income Change

Revenue effect of = Selling price Selling price price recovery in 2006 in 2005 Cost effect of price recovery
Actual units of output
= (` 110 per unit ` 100 per unit) 42,000 units = ` 420,000 (F) = Input Input Units of input price price required to produce
for variable costs
in 2006
in 2005
2006 output in 2005
Direct material costs: (`11 per sq. ft. ` 10 per sq. ft.) 126,000 sq. ft. = ` 126,000 (A) Cost effect of = Price per Price per Actual units of capacity in price recovery unit of unit of 2005, because adequate capacity for fixed costs capacity capacity exists to produce 2006 output in 2005 Cost effects of price recovery for fixed costs are: Conversion costs: (` 22 per unit 20 per unit) 50,000 units = `100,000 (A) Selling and cust.-service costs: (` 25,000 per cust. ` 24,000 per cust.) 30 customers = ` 30,000 (A)
In summary, the net increase in operating income attributable to price recovery equals: Revenue effect of price recovery ` 420.000(F)
Cost effect of price recovery Direct material costs Conversion costs Selling and customer-service costs Change in operating income due to price recovery
`126,000(A)
100,000(A) 30,000(A) 256.000(A)
`164,000(F)
Productivity Component of Operating-Income Change

Cost effect of productivity for variable costs Cost effect of productivity for direct materials Cost effect of productivity for fixed costs = Actual units of Units of input input used to produce required to produce 2006 output 2006 output in 2005 (123,000 sq. ft. 126,000 sq. ft.) ` 11 per sq. ft. = ` 33,000 (F)
Actual units of capacity in 2006
Actual units of capacity in 2005, because adequate capacity exists to produce 2006 output in 2005
Cost effects of productivity for fixed costs are: Conversion costs: (50,000 units 50,000 units) ` 20 per unit = ` 0 Selling and customer-service costs: (29 customers 30 customers) ` 25,000/customer = ` 25,000 (F)
In summary, the net increase in operating income attributable to productivity equals:

Cost effect of productivity: Direct material costs Conversion costs Selling and customer-service costs Change in operating income due to productivity ` 33,000 (F) 0 25,000 (F)
` 58,000 (F) A summary of the change in operating income between 2005 and 2006 follows:
Income Statement Amounts in 2005
Revenue Revenue Cost Effect of and and Cost Productivity Cost Effects of Component Effects Price-Recovery in 2006 of Growth Component Component in 2006 in 2006 (2) (3) ` 200,000 (F) `420,000 (F) 60,000 (A) 256,000 (A) ` 140,000 (F) ` 164,000 (F) (4) ` 58,000 (F) ` 58,000 (F)
Income Statement Amounts in 2006
(1) Revenue ` 4,000,000 Costs 2,920,000 Operating income ` 1,080,000
(5) = (1) + (2) + (3) + (4) ` 4,620,000 3,178,000 ` 1,442,000
` 362,000 (F) Change in operating income 3. Effect of the industry-market-size factor on operating income Of the increase in sales from 40,000 to 42,000 units, 3%, or 1,200 units (0.03 40,000), is due to growth in market size,and 800 units (2,000 1,200) are due to an increase in market share. The change in Westwoods operating income from the industry-market-size factor rather than specific strategic actions is: $140.000(column 2 of preceding table) X 1,200 units ` 84,000(F) 2,000 units
The analysis of operating income indicates that a significant amount of the increase in operating income resulted from Westwoods successful implementation of its product-differentiation strategy. The company was able to continue to charge a premium price for KE8 while increasing market share. Westwood was also able to earn additional operating income from improving its productivity.
--------------------------------------------------------------------------------------------------------------------------------------Question 73: The CEO of your company has been given the following statement showing the results for a recent month: Particulars Master Budget Actual Units produced & sold 10,000 9,000 ` ` Sales 8,00,000 7,00,000 Direct material 2,00,000 1,84,000 Direct Wages 3,00,000 2,62,000 Variable overhead 1,00,000 94,000 Fixed overhead 1,00,000 98,000 Total cost 7,00,000 6,38,000 Net Surplus 1,00,000 62,000 The standard cost of the product is as follows: Direct material (1 kg. @ ` 20/kg) Direct Wages (1 hour @ ` 30/hour) Variable overhead (1 hour @ ` 10/hour) Actual results for the month revealed that 9,800 kg. of material was used and 8,800 labour hours were recorded. (i) Prepare a flexible budget for the month and compare with the actual results. (ii) Calculate material volume and variable overhead efficiency variances.
Solution:
Particular
Units Sales Direct Material Direct Wages Variable Overhead Total Variable Cost Contribution Fixed Overhead Net Profit
Master Budget
10,000 Total (`) 8,00,000 3,00,000 1,00,000 6,00,000 2,00,000 1,00,000 1,00,000
Budget
9,000 Per Unit (`) 80 30 10 60 20 10 10
Flexible
9,000 Total (`) 7,20,000 2,70,000 90,000 5,40,000 1,80,000 1,00,000 80,000
Actual
(`) 7,00,000 2,62,000 94,000 5,40,000 1,60,000 98,000 62,000
Variance
20,000 (A) 8,000 (F) 4,000 (A) 20,000 (A) 2,000 (F) 18,000 (A)
(ii) Calculation of Variances:

Material Volume Variance: SP (SQ AQ) = 20 (9,000 9,800) = 16,000 (A) Variable Overhead efficiency variance SR (SH AR) = 10 (9,000 8,800) = 2,000 (F) --------------------------------------------------------------------------------------------------------------------------------------Question 80: The following information relates to a manufacturing concern: Standard Amount (`)
Material A 24,000 kgs @ ` 3 per kg. Material B 12,000 kgs @ ` 4 per kg Wages 60,000 hours @ ` 4 per hour Variable overheads 60,000 hours @ `1 per hour Fixed overheads 60,000 hours @ ` 2 per hour Total Cost Budgeted profit Budgeted sales Budgeted production (units) Actual Sales (9,000 units) Material A consumed 22,275 kgs. Material B consumed 10,890 kgs. Wages paid (48,000 hours) Fixed Overhead Variable overhead Labour hours worked Closing work in progress Degree of completion: Material A and B Wage and overheads
72,000 48,000 2,40,000 60,000 1,20,000 5,40,000 60,000 6,00,000 12,000
Amount (`) 4,57,500 62,370 44,649 1,91,250 1,20,900 45,000 47,700 900 units 100% 50%
Required: (i) Calculate all the material and labour variances. (ii) Calculate variable overhead expenditure and eciency variances, xed overhead expenditure and volume variances and sales price and sales volume variances.
Solution:
Statement of Equivalent Production in Units
Particulars Units Completed Closing W.I.P. Equivalent Units Materials % age Units 100% 9,000 100% 900 9,900 Wages & % age 100% 50% Units 9,000 450 9,450
Material Variances
Standard quantity for actual output ** x Material A 19,800 @ 3 59,400 Material B 9,900 @ 4 39,600 29,700 99,000 Actual quantity X Actual 22,275 @ 2.8* 62,370 10,889 @ 4.1* 44,649 33,165 1,07,019
Actual Cost/Actual Quantity Standard Quantity for actual output = (std qty/budgeted prod) actual output
--------------------------------------------------------------------------------------------------------------------------------------Question 78: X uses traditional standard costing system. The inspection and setup costs are actually ` 1,760 against a budget of ` 2,000. ABC system is being implemented and accordingly, the number of batches is identified as the cost driver for inspection and setup costs. The budgeted production is 10,000 units inbatches of 1,000 units, whereas actually, 8,800 units were produced in 11 batches. (i) Find the volume and total fixed overhead variance under the traditional standard costing system. (ii) Find the total fixed overhead cost variance under the ABC system.
Solution: (a) (i) Traditional Standard Costing System

Budgeted
Overhead Cost/unit 2,000/10,000 = 0.2 Variance=absorbed Budget = 0.2 X 8,800 1760 = 1,760 1,760 = 0 Budgeted Oh-Actual OH = 2,000 1,760 =240(F) = ` 0.2 per unit =Std absorption rate X(Budget unit s-Actual units)
Actual
1,760/8,800 = 0.2 Overhead actual overhead
Fixed Overhead expenditure variance Std absorption Rate = 2000/10000 Fixed Over head volume variance
=0.2X (10,000-8,800)=240(A)
Varification:
Total Fixed Overhead variance (ii) = Expenditure Variance + Volume Variance = 240(F) + 240(a) = 0
Budget
Total Cost(`) Production (units) No. of batches Batch Size (units/batch) Cost/batch 2000 10000 10 1000 200
Actual
1760 8800 11 800 160
ABC Standard
1800 8800 9 1000 200
Under ABC 8800 units should have been produced in standard batch size of 1000 units/batch No. of batches=8800/100=8.8=9 since no. fraction is possible Std Cost under ABC=budgeted cost/batch X ABC std no of batches = 200 X 9 = 1800 Under ABC, variability is with respect to batches and not units Absorbed Overheads= 9 batches X Std rate per batch = 9 X 200 = ` 1800 Actual Over heads = ` 1760 Total Overhead cost variance = ` 40 (F). ---------------------------------------------------------------------------------------------------------------------------------------

Standard Costing

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Standard Costing

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STANDARD COSTING WITH SOLUTIONS

Amount (` 2,40,000 1,00,000

Solution: Data for Material Variance (2,10,000 kg)

Consumption per 100 Units of Product

Data for Material Variances

300 (Adverse) 500 (Adverse)

Material Usage Variance

Material Cost Variance = Material Price Variance + Material Usage Variance

Material Cost Variance = Standard Cost Actual Cost

Data for Material Variance

Material Usage Variance

Material Cost Variance

160 180 340

800 1200 2,000

3,200 3,600 6,800

830 1,190 2,020

3,518.75 2,995.00 6,513.75

22 (A) 286 (F)

Actual price per kg. Material A:` 35 4 + 795 4.25

I. The cost variance in total:

600 400 500

Data for Material Variance

(`) 600 800 1,500 2900

(`) 4,650 6,200 11,625 22,475

(`) 10,000 11,600 22,000 43,600

Material Usage Variance (M.U.V.)

Material Mix Variance

Material Yield Variance

Material Cost Variance

Qty. (kg) 2,000 kg 2,150 kg 300 kg 200 kg

Qty. (kg) 5,000 3,950 1,000 1,250

Qty. (W.N. 2) 2,250 3,700

Standard Rate Amount (`) 2.00 1.25 4,500 4,625

Material Usage Variance

2. Calculation of Actual Quantity Consumed Material

() Closing stock at works

Qty 3,01,000 1,20,400 3,010 150 lot

Amount (`) 3,01,000 1,80,600 90,300 5,71,900

Data for Material Variance

4. Actual Loss 5. Actual Input of Chemical A

= (110 90) = ` 20/kg = 110 70 = ` 40/kg

6. Actual Price per Kg of Chemical B = ` 1,400/70 = ` 20/ kg

Grade X: 80 Labourers at ` 2.50 per hour Grade Y:

Data for Labour Variances

1,50,000 Sl. No. Particulars

1. Labour rate variances

Working Notes: 1. Calculation of Net Production

2. Calculation of Revised Budgeted Hrs.

Statement of Labour Variance

Labour Efficiency Variance

Labour Idle Time Variance

= 26 (A) = 16 (A) = 18 (A)

Data for Labour Variance

Statement of Labour Variances

= 22400 (A) = 9600 (A) = 25600 (F)

Labour efficiency variance

= 600 (F) = 15,600 (F) = 22,500 (A)

Labour mix variance

Labour yield variance

Required: Prepare a statement of variances.

Solution: Statement of Variances

Compute the calendar variance

Question 26: You are given the following data:

STATEMENT OF FIXED OVERHEAD VARIANCES