Standard Costing Examples

### Standard qty at std mix ### Actual qty at actual mix ### Actual qty at std mix Material Price Variance: Material Std

Rate Actual

Difference

Gum Base

0.25

0.24

0.01 Fav

Corn Syrup

0.40

0.42

0.02 UF

Sugar

0.10

0.11

0.01 UF

Material Mix Variance: MMV = (Difference b/w Actual qty at actual mix and actual qty at std mix) x std rate

Material

Actual Qty at actual mix

Gum Base Corn Syrup Sugar

Std. Mixing Ratio

Gum Base

Variance

157,000

0.6667

154,000

3,000

38,000

0.1667

38,500

500

36,000 231,000

0.1667 1

38,500 231,000

2,500

Working no.1: Calculation of Standard Mixing Ratio: Material

Actual Qty at Std. Mix

Qty

Std. Mix 800

0.6667

Corn Syrup Sugar

200

0.1667

200 1,200

0.1667 1

Working no.2: Calculation of actual quantity at actual mix: Material Gum Base

Opening Purchase Closing Stock Stock 10,000 162,000

Corn Syrup

12,000

Sugar

15,000

30,000

Actual Qty used 15,000 157,000 4,000

38,000

32,000 11,000 Actual Quantity used at Actual mixing ratio

36,000 231,000

Material Yeild Variance: Actual material input Expected yeild Output

231,000 0.8333

?

Expected yeild = Output / input 0.8333 = Output / 231,000 Output =

192,500 Std, Output 200,000 Actual output 7,500 Yeild - Fav 0.30 Std. Material output rate 2,250 Material yeild variance (Fav)

Actual Qty 162,000

MPV

### Fav

30,000 600.00 UF 32,000 320.00 UF MPV 700.00 Fav

std mix) x std rate

Std. Rate

Material Mix Variance

UF

0.25

750 UF

Fav

0.40

200 Fav

Fav

0.10

250 Fav 300 UF

Actual Qty

Fatory over head Variance 2 - Variance method 1 Controllable Variance a) Actual amount of factory overhead Fixed FOH Variable FOH

100,000

b) Budget allowance based in standard hours allowed Fixed budgeted overhead Variable budgeted OH (Standard hours allowed x Variable per unit rate) CONTROLLABLE VARIANCE

120,000 20,000

2 Volume Variance a) Budget allowance based in standard hours allowed

120,000

b) Overhead charged to production Standard hours allowed x Total Standard Factory overhead rate VOLUME VARIANCE

150,000 30,000

3 - Variance method 1 Spending Variance a) Actual amount of factory overhead Fixed FOH Variable FOH b) Budget allowance based in actual hours Fixed budgeted overhead Variable budgeted OH (Actual hours x Variable per unit rate) Spending Variance

-

-

2 Idle Capacity Variance a) Budget allowance based in Actual hours b) Overhead charged to production Actual hours x Total Standard Factory overhead rate Idle Capacity Variance

3 Efficiency Variance a) Overhead charged to production (Based on Actual hours) Actual hours allowed x Total Standard Factory overhead rate

b) Overhead charged to production (Based on Standard hours)

-

-

-

-

Standard hours allowed x Total Standard Factory overhead rate Efficiency Variance

-

Sol of Ex - 1

Material Quantity Variance Formula: Difference between Standard and Actual Quantity x Standard Rate Standard quantity allowed for production (7,200 Chairs x 12 m per chair) 86,400 meters Actual quantity used in production Difference Standard Rate Material quantity variance

87,300 meters (900) U 0.80 (720) U

Material Price Variance

Formula: Difference between Standard and Actual rate x Actual quantity purchas Standard rate for purchases Actual rate on purchases Difference Actual Quantity purchased Material price variance

0.80 0.78 0.02 F 100,000 2,000 F

tity x Standard Rate

x Actual quantity purchased

Solution of Ex-2

Material Price Variance (At the time of purchases) Difference between Standard and Actual rate x Actual quantity purchased Standard rate for purchases Actual rate on purchases Difference Actual Quantity purchase Material price variance

3.65 3.60 0.05 F 2,000 100 F

Material Price Variance (at the time of issue) Difference between Standard and Actual rate x Actual quantity ISSUE Standard rate for purchases Actual rate on purchases Difference Actual Quantity issued Material price variance

3.65 3.60 0.05 F 1,775 89 F

l quantity purchased

l quantity ISSUE

Solution of Ex -3

Labour hour/ efficency Variance Difference between Standard and Actual hours x Standard Rate Standard hours allowed for production (2,000 units x 0.80 hours) Actual hours used in production Difference Standard Rate Labour hour/ efficency Variance

1,600 1,580 20 F 6.75 135 F

Labour Price Variance Difference between Standard and Actual rate x Actual hours used Standard rate for payment of labour Actual rate paid to labour Difference Actual hours used Labour Price Variance

6.75 6.90 (0.15) u 1,580 (237) u

dard Rate

l hours used

Solution of Ex -4

Fatory over head Variance 2 - Variance method 1 Controllable

Variance

a) Actual amount of factory overhead 1 Fixed FOH 2 Variable FOH

4,500 6,500

b) Budgeted Factory overhead: 1 Fixed budgeted overhead 4,500 2 Variable budgeted OH (Standard hours allowed x 4,500 Variable per unit rate) 1.50 6,750 CONTROLLABLE VARIANCE 2 Volume

Variance

a) Budgeted Factory overhead: 1 Fixed FOH 2 Variable FOH

4,500 6,750

b) Standard Fac tory overhead 1 Fixed FOH (4,500 hours x 0.90) 2 Variable FOH (4,500 hours x 1.50)

4,050 6,750

VOLUME VARIANCE

3 - Variance method 1 Spending

Variance

a) Actual amount of factory overhead 1 Fixed FOH 2 Variable FOH b) Budgeted Factory overhead 1 Fixed budgeted overhead 2 Variable budgeted OH (Actual hours worked x 4,400 Variable per unit rate) 1.50 Spending Variance 2 Idle

4,500

6,600

Capacity Variance

a) Budget allowance based in Actual hours allowed b) Overhead charged to production (Based on Actual hours) Actual hours allowed x 4,400 Total Standard Factory overhead rate 2.40 Idle Capacity Variance

3 Efficiency

Variance

a) Overhead charged to production (Based on Actual hours) Actual hours allowed x Total Standard Factory overhead rate

b) Overhead charged to production (Based on Standard hours) Standard hours allowed x Total Standard Factory overhead rate Efficiency Variance

4 - Variance method 1 Spending

Variance

a) Actual amount of factory overhead Fixed FOH Variable FOH

b) Budget allowance based on actual hours Fixed budgeted overhead Variable budgeted OH (Actual hours x Variable per unit rate) Spending Variance

4,400 1.50

2 Variable Efficiency Variance: Budget allowance based on actual hours Budget allowance based on Standard hours allowed

Variable Efficiency Variance:

OR

Proof

Difference between actual hours and Standard hours x variable FOH rate (4500 hours std. - 4400 hours actual) x 1.50 (100 hours Fav x 1.50) Rs. 150 Fav.

3 Fixed Efficiency Variance: Actual hours x Fixed FOH rate

(4,400 hours x 0.90)

Standard hours allowed x Fixed FOH rate

(4,500 hours x 0.90)

Fixed Efficiency Variance: Proof

OR

Difference between actual hours and Standard hours x Fixed FOH rate

(4500 hours std. - 4400 hours actual) x 0.90 (100 hours Fav x 0.90) Rs. 90 Fav.

4 Idle Capacity Variance Normal Capacity hours x Fixed FOH rate

(5,000 hours x 0.90)

Actual hours worked x Fixed FOH rate

(4,400 hours x 0.90)

Idle Capacity Variance Proof

OR

Difference between actual hours and Normal capacity hours x Fixed FOH rate (5000 hours std. - 4400 hours actual) x 0.90 (600 hours Unfav x 0.90) Rs. 540 Unfav.

iance

11,000

11,250 (250) F

11,250

10,800 (450)

U

4,500 6,500

11,000

11,100 (100) F

11,100

10,560 (540) U

10,560

dard hours) 4,500 2.40

10,800 (240) F

11,000

4,500

6,600

11,100 100

Fav

11,100 (11,100)

Fav

s x variable FOH rate

ours x 0.90) (4,500 hours x 0.90)

s x Fixed FOH rate

3,960 4,050 90

Fav

4,500 3,960 540

ty hours x Fixed FOH rate

Unfav

Quantity Schedule: Units in process (at start) Units put in to process Total

80 units (all material, 50% conversion) 7,850 units 7,930 units

Units completed & tansferred out Units in process (at end)

7,830 units 100 units (all material, 50% conversion) 7,930 units

Equivalent Production Unit

Units completed & transferred out Less: Opening stock

Material 7,830 (80)

Conversion 7,830 (80)

Unit started & completed Add: Opening stock - work this period Add: Closing stock - work this period EPU

7,750 100 7,850

7,750 40 50 7,840

Material Quantity Variance Formula:Difference between Standard and Actual Quantity x Standard Rate Standard quantity allowed for production (7,850 units x 24 kgs per unit)

188,400

Actual quantity used in production

192,410

Difference Standard Rate Material quantity variance

4,010 U 3 12,030 U

Material Price Variance Formula:Difference between Standard and Actual rate x Actual quantity used

Standard rate for purchases Actual rate on purchases

3 3.04

Difference Actual Quantity

0.04 U 192,410

Material price variance

7,696.40 U

Labour hour/ efficency Variance Formula:Difference between Standard and Actual hours x Standard Rate Standard hours allowed for production (7,840 units x 6 hours per unit consumption)

47,040

Actual hours used in production

46,830

Difference Standard Rate

210 F 6.50

Labour hour/ efficency Variance

1,365 F

Labour Price Variance Formula:Difference between Standard and Actual rate x Actual hours used Standard rate for payment of labour Actual rate paid to labour Difference Actual hours used Labour Price Variance

6.50 6.60 0.10 U 46,830 4,683 U

Fatory over head Variance 2 - Variance method 1 Controllable Variance

a) Actual amount of factory overhead Fixed FOH Variable FOH

11,250 25,090

b) Budget allowance based in standard hours allowed Fixed budgeted overhead 11,250 Variable budgeted OH (Standard hours allowed x 47,040 Variable per unit rate) 0.50 23,520 CONTROLLABLE VARIANCE Note: Standard hours allowed = 7,840 units x 6 =47,040 hours Standard rate = Rs. 22,500 / 45,000 hours = 0.50

2 Volume Variance a) Budget allowance based in standard hours allowed b) Overhead charged to production Standard hours allowed x 47,040 Total Standard Factory overhead rate 0.75 VOLUME VARIANCE Note: Total FOH rate = Rs. 33,750 / 45,000 hours = 0.75

erial, 50% conversion)

erial, 50% conversion)

antity used

36,340

34,770 1,570 U

34,770

35,280 510 F

Required no.1: Standard quantity allowed of material: Actual production Per unit standard consumption of material Standard quantity allowed

4,000 units 6 lbs 24,000 lbs

Required no.2: Actual quantity used of material: Standard quantity allowed add: unfavourable quantity variance

24,000 lbs 1,000 lbs

Actual quantity used

25,000 lbs

Required no. 3: Standard hours allowed: Actual production Per unit standard consumption of labour

4,000 units 1 hour

Standard hours allowed

4,000 hours

Required no. 4: Actual hours worked: Standard hours allowed Less: Favourable labour efficiency variance

4,000 hours (200) hours

Actual hours allowed

3,800 hours

Note: Favourable hours = Rs. 800 efficiency variance / Rs. 4 per hour = 200 hours Required no. 5: Actual direct labour rate: Standard direct labor rate Add: unfavourable labor rate variance

4 0.20

Actual direct labour rate

4.20

Note: Unfavourable rate = Rs. 760 labor rate variance / 3,800 actual hours worked

= 0.20 Required no. 6: Actual Factory overhead Standard factory overhead (4,000 units actual production x Rs. 3 per unit FOH rate) Add: unfavourable FOH variance Actual Factory overhead

ual hours worked

12,000 500 12,500

Aplha Actual Sales Actual COGS

Beeta

120 million @ Rs. 1.10 120 million @ Rs. 0.90

40 million @ Rs. 2.20 40 million @ Rs. 1.80

Budgeted Sales 110 million @ Rs. 1.35 Budgeted COGS 110 million @ Rs. 1.10

70 million @ Rs. 2.70 70 million @ Rs. 2.20

Required (1): Calculate a) Sales Price variance b) Sales volume variance c) Cost price variance d) Cost volume variance Required (2) Sales mix and the final sales volume variance

Solution

Sales Price Variance: (Actual quantity x Actual mix x Actual rate) - (Actual quantity x Actual mix x Std.

[(Actual qty x actual rate) + (actual qty x actual rate)] - [(Actual qty x std rate) + ( [(6,000 x 10) + (2,000 x 20)] - [(6,000 x 12.5) + (2,000 x 25)] Rs. 25,000 (Un-Favourable)

Sales Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std

[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (B [(6,000 x 12.5) + (2,000 x 25)] - [(5,000 x 12.5) + (3,500 x 25)] Rs. 25,000 (Un-Favourable) Req no. 3:

Cost Price variance

[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x

Cost Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std [(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x

SALES MIX VARIANCE Actual quantity x actual mix x standard rate Less: Actual quantity x actual mix x standard COGS rate

Less: Actual sales (both) x budgeted average gross profit (6,000 + 2000) x 3.5294 SALES MIX VARIANCE

Total Rs. 220 million Rs. 180 million Rs. 337.50 million Rs. 275.00 million

(Actual quantity x Actual mix x Std. rate)

al rate)] - [(Actual qty x std rate) + (actual qty x std rate)]

(2,000 x 25)]

udgeted quantity x actual mix x std rate)

te)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]

+ (3,500 x 25)]

x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]

udgeted quantity x actual mix x std rate)

std. COGSrate)] - [(Budgeted Qty x std COGS rate) + (Budgeted qty x std COGS rate)]

125,000 (100,000) 25,000 gross profit (28,235.20) (3,235.20) Unfav.

Aplha

Beeta

Total

Actual Sales Actual COGS

120 million @ Rs. 1.10 120 million @ Rs. 0.90

40 million @ Rs. 2.20 40 million @ Rs. 1.80

Rs. 220 million Rs. 180 million

Budgeted Sales Budgeted COGS

110 million @ Rs. 1.35 110 million @ Rs. 1.10

70 million @ Rs. 2.70 70 million @ Rs. 2.20

Rs. 337.50 million Rs. 275.00 million

Required (1): Calculate a) Sales Price variance b) Sales volume variance c) Cost price variance d) Cost volume variance Required (2) Sales mix and the final sales volume variance

Solution Sales Price Variance: (Actual quantity x Actual mix x Actual rate) - (Actual quantity x Actual mix x Std. rate) [(Actual qty x actual rate) + (actual qty x actual rate)] - [(Actual qty x std rate) + (actual qty x std [(120 m x 1.10) + (40 m x 2.20)] - [(120 m x 1.35) + (40 m x 2.70)] Rs. 220 - Rs. 270 Rs. 50 million (unfavourable) Sales Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)

[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x s [(120 m x 1.35) + (40 m x 2.70)] - [(110 m x 1.35) + (70 m x 2.70)] [162 + 108] - [ 148.50 + 189] 270 - 337.50 67.50 (Unfavourable) Req no. 3:

Cost Price variance

[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate) [(120 m x 0.90) + (40 m x 1.80)] - [(120 m x 1.10) + (40 m x 2.20)] [108 + 72] - [ 132 + 88]

180 - 220 40 Million (Favourable)

Cost Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate) [(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x std COGS rate) [(120 m x 1.10) + (40 m x 2.20)] - [(110 m x 1.10) + (70 m x 2.20)] [ 132 + 88] - [ 121 + 154] 220 - 275 Rs. 55 (Favourable)

SALES MIX VARIANCE Actual quantity x actual mix x standard rate Less: Actual quantity x actual mix x standard COGS rate

270 (220) 50

Less: Actual sales (both) x budgeted average gross profit (120 m + 40 m) x 0.347 SALES MIX VARIANCE

(55.52) (5.52)

FINAL SALES VOLUME VARIANCE Budget sales Less: Budgeted COGS Budgeted Gross Profit Less: Actual sales (both) x budgeted average gross profit (120 m + 40 m) x 0.347

337.50 (275.00) 62.50 (55.52) 6.98

mix x Std. rate) rate) + (actual qty x std rate)]

mix x std rate)

rate) + (Budgeted qty x std rate)]

tual qty x std COGSrate) + (actual qty x std COGSrate)]

mix x std rate)

ed Qty x std COGS rate) + (Budgeted qty x std COGS rate)]

unfavourable

unfavourable

Required no. 1: Schedule of allocation of variance: Variances Material Price variance Labour efficiency variance FOH Controllable FOH Volume

W-1

12,000 6,000 7,200 12,000 37,200

4,500 1,200 2,880 4,800 13,380

Material Variance Inventory 60,000 4,500 20,000 1,500 80,000 6,000 160,000 12,000

Labour Efficiency variance allocation

WIP FG COGS

W-3

W-1 W-2 W-3 W-3

WIP

Material Price variance allocation

WIP FG COGS

W-2

Total

Labour Variance Cost 20,000 1,200 20,000 1,200 60,000 3,600 100,000 6,000

FOH Controllable & Volume variance allocation

WIP FG COGS

FOH Controllable Volume Cost Variance Variance 80,000 2,880 4,800 20,000 720 1,200 100,000 3,600 6,000 200,000 7,200 12,000

Required no.2: COMPARATIVE COGS Stardard

Variance

Actual

Material purchased Less: Ending R/Material Raw material used

200,000 (40,000) 160,000

12,000 -

212,000 (40,000) 172,000

Direct labor

100,000

6,000

106,000

Prime Cost

260,000

Factory overhead

200,000

19,200

219,200

460,000 (160,000)

13,380

497,200 (173,380)

Manufacturing cost Less: WIP (at end) Cost of Goods manufactured

300,000

Less: Finished goods (at end)

(60,000)

Cost of Goods Sold

240,000

278,000

323,820 4,620

259,200

Required no. 3: Income Statement (Actual Basis) Sales Less: Cost of goods sold

520,000 (259,200)

Gross Profit (actual) Less: Operating Expenses: Administrative Expenses Marketing Expenses NET INCOME (Actual)

260,800

120,000 60,000

(180,000) 80,800

Required no. 4: Reconcilation of Standard and Actual Income: NET INCOME (Actual)

80,800

Add: Variance allocated to COGS

19,200

Standard Income

(64,620)

100,000

FG 1,500 1,200 720 1,200 4,620

COGS 6,000 3,600 3,600 6,000 19,200

Requried no.1: Material Price, Mix and Yeild variance: Material Price variance: Material Actual Price

Standard Price

Variance

A

2,200

2,150

50

B

1,850

1,750

100

C

1,200

1,250

50

Material Mix Variance

Formula (Difference b/w actual qty used and actual qty at std mix) x Standa

Material Actual Standard Quantity used Mix %

Actual Qty at Std. mix

A

1,870

50

1,705

B

1,100

40

1,364

C

440 3,410

10 100

341 3,410

Material Yeild Variance

Formula (Difference b/w actual qty at std mix and std qty at std mix) x Stand

Material Actual Qty at Std. mix

Standard Mix %

Std. Qty at Std. Mix

A

1,705

50

1,778.70

B

1,364

40

1,422.96

C

341 3,410

10 100

355.74 3,557.40

Actual production x Input ratio 3,234 tons x 110% 3,557.40

Labour hour/ efficency Variance Formula: Difference between Standard and Actual hours x Standard Rate Std. hours allowed for actual input (500 hours/ 110 input x 3,410 act. input) Actual hours used for actual input Difference Standard Rate Labour hour/ efficency Variance

Labour Rate Variance Formula: Difference between Standard and Actual rate x Actual hours used Standard rate for payment of labour Actual rate paid to labour Difference Actual hours used Labour Price Variance

Labour Yield Variance

Std. hours allowed for actual input (std. hours for actual input) (3,410 tons x 500 hours / 110 tons) Std. hours allowed for actual Output (std. hours for actual Output) (3,234 tons x 500 hours /100 tons) Difference Std. rate of direct labor Labour Yield Variance

1 Spending Variance a) Actual amount of factory overhead Fixed FOH Variable FOH b) Budget allowance based in actual hours Fixed budgeted overhead Variable budgeted OH (Actual hours x Variable per unit rate)

Standard Variable rate

Rs. 412,500 / 16,500 hours = Rs. 25

2 Idle Capacity Variance a) Budget allowance based in Actual hours b) Overhead charged to production Actual hours x Total Standard Factory overhead rate

Standard Total FOH rate = (618,750 + 412,500) / 16,500 hours = Rs.

3 Efficiency Variance a) Overhead charged to production (Based on Actual hours) Actual hours allowed x Total Standard Factory overhead rate

b) Overhead charged to production (Based on Standard hours) Standard hours allowed for actual input x Total Standard Factory overhead rate

4 Factory overhead Yeild variance Std. hours allowed for actual input (std. hours for actual input x Total std. FOH rate) (3,410 tons x 500 hours / 110 tons x Rs 62.5)

Std. hours allowed for actual Output (std. hours for actual Output x Total std. FOH ra (3,234 tons x 500 hours /100 tons x Rs. 62.5)

Actual QTY Purchases

Material Price Variance

Unfav.

2,000

100,000 Unfav.

Unfav.

1,200

120,000 Unfav.

500

25,000 Fav 195,000 Unfav.

Fav Material Price variance

actual qty at std mix) x Standard price

Variance

Standard priceMaterial Mix Variance 165 unfav

2,150 354,750 unfav

264 fav

1,750 462,000 fav

99 unfav 1,250 123,750 unfav MATERIAL MIX VARIANCE 16,500 unfav

and std qty at std mix) x Standard price

Variance

Standard price Material yeild variance

73.70 Fav

2,150

### Fav

58.96 Fav

1,750

### Fav

14.74 Fav 1,250 18,425 Fav MATERIAL yeild VARIANCE ### Fav

s x Standard Rate

0 input x 3,410 act. input)

15,500 15,800 300 unfav 37.50 11,250 unfav

x Actual hours used 37.50 39.75 2.25 Unfav 15,800 35,550 Unfav

15,500

tual Output) 16,170 670 Fav

rate of direct labor our Yield Variance

37.50 25,125 Fav

553,750 424,500

978,250

618,750 15,800 x Rs 25 Spending Variance

395,000

1,013,750 35,500 Fav

412,500 / 16,500 hours = Rs. 25

1,013,750

15,800 x Rs 62.50 Idle Capacity Variance

50 + 412,500) / 16,500 hours = Rs. 62.50

987,500 26,250 Unfav

tual hours)

987,500

andard hours) 15,500 x Rs 62.50 Efficiency Variance

actual input x Total std. FOH rate) 500 hours / 110 tons x Rs 62.5)

or actual Output x Total std. FOH rate) x 500 hours /100 tons x Rs. 62.5)

968,750 18,750 Unfav

968,750

1,010,625 41,875 Fav

-

W-1: Actual cost of material Items

Actual Qty used

Actual Rate

Actual Cost

Alpha

109,200

7.25

791,700

Beta

149,500

3.25

485,875

Gamma

27,300 286,000

13.50

368,550 1,646,125

W-2: Actual matererial used at Standard rate: Items

Actual Qty used

Standard Rate

Standard Cost

Alpha

109,200

6.50

709,800

Beta

149,500

4.00

598,000

Gamma

27,300 286,000

13.00

354,900 1,662,700

W-3: Actual material at Standard mix and Standard rate: Items

Actual Qty used

Standard Mix

Actual Qty at std. mix

Standard Rate

Alpha

109,200 5,200 / 13,000 = .40

114,400

6.50

Beta

149,500 6,500 / 13,000 = .50

143,000

4.00

Gamma

27,300 1,300 / 13000 = .10 286,000

28,600 286,000

13.00

W- 4: Standard material for actual production: Actual Production

253,300

`

Standard material for actual production Input ratio Output ratio

100 90

Actual production is 253,300 kgs which is 90% of Input Therefore Input kgs are 253,300 / 90% Proof: Input Less: 10% wastage Actual Production (output)

281,444 kgs

281,444 (28,144) 253,300

W-5: Standard material at Standard Mix and rate Items

Standard Ratio

Standard Material at Standard Mix

Standard Rate

Amount

Alpha

40%

112,578

6.50

731,756

Beta

50%

140,722

4.00

562,889

Gamma

10%

28,144 281,444

13.00

365,878 1,660,522

Required1: Direct Material Total Variance

Direct material total variance = Difference between Standard and Actual Cost of materia Actual Cost of Direct material (W-1)

1,646,125

Standard Cost of Direct material (W-5) Direct Material Total Variance

1,660,522 14,397 Fav

Required 2: Direct Material Price Variance Material

Actual Price

Standard Price

Variance

Actual QTY Purchases

Alpha

7.25

6.50

0.75 Unfav.

109,200

Beta

3.25

4.00

0.75 Fav

149,500

Gamma

13.50

13.00

0.50 Unfav. 27,300 Material Price variance

Required no 4: Direct Material Mix variance Material Mix Variance

Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price

Material Actual Standard Quantity used Mix %

Actual Qty at Std. mix

Variance

Alpha

109,200

40

114,400

5,200 Fav

Beta

149,500

50

143,000

6,500 Unfav

Gamma

27,300 286,000

10 100

28,600 286,000

1,300 Fav MATERIAL MIX VARIANC

Amount

743,600 572,000 371,800 1,687,400

Actual Cost of material

Material Price Variance 81,900 Unfav. 112,125 Fav

13,650 Unfav. 16,575 Fav

x) x Standard price

Standard Rate

Material Mix Variance 6.50

33,800 Fav

4.00

26,000 Unfav

13.00

ATERIAL MIX VARIANCE

16,900 Fav 24,700 Fav

Comparative Income Statement Analyzing the Budgeted and Actual Operating Income Sales

(118,000 units x Rs 25)

Less: Cost of Goods sold Cost of Goods manufactured (110,000 units x 17.60) Add: Finished goods (at start) (20,000 units x 17.60) TOTAL FINISHED GOODS AVAILABLE Less: Finished goods (at end) (12,000 units x 17.60)

1,936,000 352,000 2,288,000 (211,200)

2,076,800

COST OF GOODS SOLD (STD.) Add: Unfavourable variance Material quantity variance (W-4) Labour price variance (W-7) FOH Controllable variance (W-8)

Less: Favourable variance Material Price Variance (W-5) Labour hour variance (W-6) FOH Volume variance (W-9)

24,000 25,760 16,500 66,260

66,260

3,750 32,000 7,000 42,750

(42,750)

COST OF GOODS SOLD (Actual)

GROSS PROFIT (ACTUAL) Less: Operating Expenses Administrative and marketing expenses NET INCOME (ACTUAL) W-1: Calculation of numbers of units sold: Units Finished goods (at start) Add: Production during the period Total FG available for sales Less: Finished goods (at end) UNITS SOLD

20,000 110,000 130,000 (12,000) 118,000

W-2: Per unit cost of Product: Direct material per unit

(2 units x 1.50)

3.00

Direct Labor per unit (1.50 hours x 8) Variable FOH per unit Fixed FOH per unit Per unit cost of Product

12.00 1.50 1.10 17.60

W-3: Equivalent Production Unit Unit in process (at start) Add: Units put into production Total Work in process Less: Unit in process (at end) Units completed Less: Unit in process (at start) - all units Add: Units in process (at start) - 3/5 completed Add: Units in process (at end) - 1/3 completed Actual Material used

W-4

Material 10,000 240,000 250,000 (15,000) 235,000 (10,000) 225,000 6,000 231,000 5,000 236,000

Material Quantity Variance Formula: Difference between Standard and Actual Quantity x Standard Rate

Standard quantity allowed for production (110,000 units x 2 lbs per unit)

220,000

Actual quantity used in production

236,000

Difference Standard Rate

16,000 1.50

Material quantity variance

W-5

24,000

Material Price Variance Formula: Difference between Standard and Actual rate x Actual quantity purchased

Standard rate for purchases Actual rate on purchases

1.500 1.485

Difference Actual Quantity

0.015 Fav 250,000 3,750 Fav

Material price variance

W-6

Labour hour/ efficency Variance Standard hours allowed for production (110,000 units x 1.5 hours per unit)

165,000

Actual hours used in production 161,000 (1,313,760 / 8.16) 4,000 Fav 8

Difference Standard Rate

32,000 Fav

Labour hour/ efficency Variance

W-7

Labour Price Variance Standard rate for payment of labour Actual rate paid to labour Difference Actual hours used

8.00 8.16 0.16 UnFav 161,000 25,760 UnFav

Labour Price Variance

Fatory over head Variance 2 - Variance method W-8

1 Controllable

Variance

a) Actual amount of factory overhead Fixed FOH Variable FOH b) Budget allowance based in standard hours allowed Fixed budgeted overhead

Variable budgeted OH (Standard hours allowed x 110,000 Variable per unit rate) 1.50 CONTROLLABLE VARIANCE

W-9

2 Volume

Variance

a) Budget allowance based in standard hours allowed b) Overhead charged to production Standard hours allowed x Total Standard Factory overhead rate VOLUME VARIANCE

110,000 2.60

2,950,000

(2,100,310) 849,690 (651,000) 198,690

Unfav per lbs Unfav

13,760 / 8.16)

nce

114,000 181,500

114,000

295,500

165,000

279,000 16,500 Unfav

279,000

286,000 7,000 Fav