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Formu
Difference between Standard and Actual Quantity x Standard Rate
Difference -
Standard Rate
Formu
Difference between Standard and Actual rate x Actual quantity purchased or issued
Difference -
Actual Quantity purchase / issue
Formu
Difference between Standard and Actual hours x Standard Rate
Difference
Standard Rate
Formu
Difference between Standard and Actual rate x Actual hours used
Difference
Actual hours used
2 - Variance method
1 Controllable Variance
a) Actual factory overhead
I) Fixed FOH 20,000
2 Volume Variance
a) Budget FOH 36,500
OR
a) Budget FOH
I) Fixed budgeted overhead 20,000
3 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
I) Fixed FOH 20,000
II) Variable FOH 19,250 39,250
4 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
I) Fixed FOH
II) Variable FOH -
Calculate the material price variance for each material by same procedure.
Material A (Difference b/w std and actual rate) x actual qty purchase or used for Material A
Material B (Difference b/w std and actual rate) x actual qty purchase or used for Material B
Material C (Difference b/w std and actual rate) x actual qty purchase or used for Material C
MATERIAL PRICE VARIANCE
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard price
Difference
Std. Rate
Labour Yeild Variance:
LYV (Difference b/w Expected output and actual output x per unit hour cons.) x Std. Rate
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 3800
Variable per unit rate) 2
Spending Variance
ss is more 0.1667
Material Qty
Variance
750
800
400
1,950
3,850
3800
50 Fav
6
300 Fav
6
6.08
0.08 U
3800
304 U
3,850
4,000
150
6
900 Fav
12,000
10,000 22,000
12,000
7,600 19,600
2,400 UNFAV.
19,600
19,000
acity Variance 600 UnFav.
19,000
20,000
1,000 Fav
19,000
Expected output:
19,250
FICIENCY VARIANCE: 250 Fav
Expected output:
19,250
Actual output:
20,000
ILD VARIANCE: 750 Fav
Sol of Ex - 1
Material Quantity Variance
Formula: Difference between Standard and Actual Quantity x Standard Rate
Difference 900 UF
Standard Rate 0.80
Difference 0.02 F
Actual Quantity purchased 100,000
Difference 0.05 F
Actual Quantity purchase 2,000
Difference 0.05 F
Actual Quantity issued 1,775
antity ISSUE
Solution of Ex -3
Difference 20 F
Standard Rate 6.75
Difference 0.15 u
Actual hours used 1,580
l hours used
Solution of Ex -4
1 Controllable Variance
a) Actual amount of factory overhead Rs. 11,000
Fixed FOH 4,500
Variable FOH 6,500
2 Volume Variance
a) Budget allowance based in standard hours allowed
3 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH 4,500
Variable FOH 6,500
3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours allowed x
Total Standard Factory overhead rate
4 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH
Variable FOH
Proof OR
Difference between actual hours and Standard hours x variable FOH rate
Proof OR
Difference between actual hours and Standard hours x Fixed FOH rate
Rs. 90 Fav.
4 Idle Capacity Variance
Proof OR
Difference between actual hours and Normal capacity hours x Fixed FOH rate
Example
2 - Variance method
1 Controllable Variance
a) Actual amount of factory overhead
Fixed FOH 4,500
Variable FOH 6,500
1 Spending Variance
a) Actual factory overhead
Fixed FOH 4,500
Variable FOH 6,500 11,000
b) Budgeted FOH
Fixed budgeted overhead 4,500
Variable budgeted OH
(Actual hours worked x 4,400
Variable per unit rate) 1.50 6,600 11,100
Spending Variance 100
b)Standard FOH
Fixed FOH (4,400 hours x 0.90) 3,960
Variable FOH (4,400 hours x 1.50) 6,600 10,560
Idle Capacity Variance 540
3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours allowed x 4,400
Total Standard Factory overhead rate 2.40 10,560
4 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH
Variable FOH 11,000
Proof OR
Difference between actual hours and Standard hours x variable FOH rate
Rs. 150 UF
Standard hours allowed x Fixed FOH rate (4,500 hours x 0.90) 4,050
Proof OR
Difference between actual hours and Standard hours x Fixed FOH rate
Rs. 90 Fav.
Actual hours worked x Fixed FOH rate (4,400 hours x 0.90) 3,960
Proof OR
Difference between actual hours and Normal capacity hours x Fixed FOH rate
Example
11,000
11,250
(250) F
11,250
10,800
(450) U
11,000
11,100
(100) F
11,100
10,560
(540) U
10,560
10,800
(240) F
11,000
11,100
100 Fav
11,100
11,250
150 Fav
e FOH rate
3,960
4,050
90 Fav
4,500
3,960
540 Unfav
11,000
11,250
250 F
11,250
10,800
450 UF
Fav
UF
Fav
UF
UF
Unfav
Material Quantity Variance
Difference 400 U
Standard Rate 0.50
FormulaDifference between Standard and Actual rate x Actual quantity purchased or issu
Difference 0.01 U
Actual Quantity used 14,400
Difference 250 U
Standard Rate 9
Labour hour/ efficency Variance 2,250 U
1 Controllable Variance
a) Actual amount of factory overhead
Fixed FOH 5,000
Variable FOH 12,550
CONTROLLABLE VARIANCE
2 Volume Variance
a) Budget allowance based in standard hours allowed
3 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH 5,000
Variable FOH 12,550
Spending Variance
3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours worked x
Total Standard Factory overhead rate
(9,000 hours x 2)
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH 5,000
Variable FOH 12,550
Spending Variance
17,550
18,125
575 F
18,125
17,500
(625) U
cost rate
17,550
18,500
950 F
18,500
18,000
-
500 U
ed cost rate
18,000
17,500
500 U
17,550
18,500
950
18,000
-
###
ed cost rate
-
-
-
Quantity Schedule:
Difference 4,010 UF
Standard Rate 3
Material quantity variance 12,030 UF
Formula: Difference between Standard and Actual rate x Actual quantity used
Difference 0.04 UF
Actual Quantity 192,410
Difference 210 F
Standard Rate 6.50
Difference 0.10 UF
Actual hours used 46,830
1 Controllable Variance
a) Actual amount of factory overhead
Fixed FOH 11,250
Variable FOH 25,090
2 Volume Variance
a) Budget allowance based in standard hours allowed
3 VARIANCE:
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH 11,250
Variable FOH 25,090
3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours allowed x
Total Standard Factory overhead rate
4 - Variance method
Proof
Difference between actual hours and Standard hours x variable FOH rate
105 Fav
3 Fixed Efficiency Variance:
Proof OR
Difference between actual hours and Standard hours x Fixed FOH rate
52.5 Fav
34,770
1,570 U
hours = 0.50
34,770
35,280
510 F
36,340
34,665
1,675 UF
34,665
35,123
458 FAV
35,123
35,280
(158) Fav
Expected Yeild or Input ratio = Output / Input x 100
Calculate the material price variance for each material by same procedure.
Material A (Difference b/w std and actual rate) x actual qty purchase or used for Material A
Material B (Difference b/w std and actual rate) x actual qty purchase or used for Material B
Material C (Difference b/w std and actual rate) x actual qty purchase or used for Material C
MATERIAL PRICE VARIANCE
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
or
Input = Output / Expected yeild 10,000 / 2.667
8000/2.667 3750 Input
Input = 3000 4800 Actual Input
1,050 x 0.30
315
Material Yeild Variance
Material Yeild variance = (Diff. B/w Expected output as per expected yeild and actual output) x std average materia
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard pri
xxxx
xxx
xxxx
) x Standard price
Material Mix
Variance
10.00 Fav
40.00 Unfav
30.00 unfav
ut) x std average material rate
Material yeild
variance
(35) Unfav
(280) Unfav
(315) Unfav
Actual consumption Standard consumption for 12,500 FG:
Kgs Rate
A 8,750 0.056 A 1,500 0.0600
B 3,750 0.380 B 625 0.4000
C 6,250 0.280 C 1,000 0.2500
18,750 0.716 3,125 0.710
Input rate =
Output rate =
or
Input = Output / Expected yeild
12500 / 4
Input = 3,125
For actual output (77,500 tubes), Standard input as per expected yeild
Input = Output / Expected yeild
Input = 77,500 / 4
METHOD NO.2:
Material Yeild variance = (Diff. B/w Expected output as per expected yeild and actual output) x std
material rate (O
Output = 75,000
Material Yeild variance = (Diff. B/w Expected output as per expected yeild and actual output) x std average materia
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard price
0.1888 per kg
0.0472 per tube
0.060 15 Fav
0.400 -
0.250 63 unfav
MIX VARIANCE 48 unfav
0.06 18 Fav
0.40 50 Fav
0.25 50 Fav
yeild VARIANCE 118 Fav
Required no.1: Standard quantity allowed of material:
Note: Favourable hours = Rs. 800 efficiency variance / Rs. 4 per hour
= 200 hours
Note: Unfavourable rate = Rs. 760 labor rate variance / 3,800 actual hours worked
= 0.20
500
12,500
FORMULA:
Calculate the material price variance for each material by same procedure.
Material A (Difference b/w std and actual rate) x actual qty purchase or used for M
Material B (Difference b/w std and actual rate) x actual qty purchase or used for M
Material C (Difference b/w std and actual rate) x actual qty purchase or used for M
MATERIAL PRICE VARIANCE
e0
Recognized at the time of purchases:
Formula (Difference b/w actual qty used at actual mix and actual qty at std mix) x Std. Rate
Step # 1:
Actual quantity used - in the production for 200,000 lbs of chewing gum (F.G) during Jan
Step # 2:
METHOD NO.1:
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard price
Output = 192,500
Summary:
Input Expected Output
Yeild
METHOD NO.4:
Material yeild variance = Difference between (Actual input x input material rate) and (Actual output x outp
Labor Efficience Variance(2) = Diff b/w std. hours allowed for expected output and actual hours used x St
Actual input = 231,000 lbs and Expected output as per Expected yeild 192,500 lbs
Hours
Total hours saved 150
Std. rate per hour 6
LYV (Difference b/w Expected output and actual output x per unit hour cons.) x Std. Rate
xxx
xxxx
xxx
xxxx
MPV
y Purchase
1,620 Fav
600 Unfav
320 Unfav
700 Fav
MPV
1,570 Fav
760 Unfav
360 Unfav
450 Fav
at std mix) x Std. Rate
Actual material
Used
157,000
38,000
36,000
231,000 Actual
Input
ndard price
Std. MYV
Price
0.25 1,500 Fav
0.40 600 Fav
0.10 150 Fav
L YEILD VARIANCE 2,250 Fav
and actual output) x std
material rate (Output rate)
192,500
200,000
7,500 Fav
0.30
2,250 Fav
actual production
rate) and (Actual output x output rate)
Material Qty
Variance
750
800
400
1,950
tput and actual hours used x Std rate
3,850
3,800
50 Fav
6
300 Fav
6.00
6.08
0.08 U
3,800
304 U
unit hour cons.) x Std. Rate
Aplha Beeta
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) + (
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (B
[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x
(2,000 x 25)]
+ (3,500 x 25)]
x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
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.
Pg 614, Illustration 1 of Standard costing:
20,000
35,000
16,000 Fav
2,000 Unfav
8,000 Fav
22,000 Fav
SVV
10,000 Fav
12,000 Unfav
-
2,000 Unfav
CPV
-
-
12,500 Unfav
12,500 Unfav
CVV
8,000 Unfav
10,500 Fav
-
2,500 Fav
Base yr SMV
G.P
Unfav
Aplha Beeta Total
Actual Sales 120 million @ Rs. 1.10 40 million @ Rs. 2.20 Rs. 220 million
Actual COGS 120 million @ Rs. 0.90 40 million @ Rs. 1.80 Rs. 180 million
Budgeted Sales 110 million @ Rs. 1.35 70 million @ Rs. 2.70 Rs. 337.50 million
Budgeted COGS 110 million @ Rs. 1.10 70 million @ Rs. 2.20 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
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x s
270 - 337.50
67.50 (Unfavourable)
[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate)
40 Million (Favourable)
[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x std COGS rate)
220 - 275
Rs. 55 (Favourable)
50
Less: Actual sales (both) x budgeted average gross profit
(120 m + 40 m) x 0.347 (55.52)
unfavourable
unfavourable
Required no. 1: Schedule of allocation of variance:
Sales 520,000
Less: Cost of goods sold (258,000)
1,200 4,800
1,200 3,600
720 3,600
1,200 6,000
4,320 18,000
V on R/ m (at end)
V on used material
Volume
Variance
4,800
1,200
6,000
12,000
Requried no.1: Material Price, Mix and Yeild variance:
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard p
or
Input = Output / Expected yeild
3,234 tons / 0.9090909
Input = 3,557.40
670
Standard rat 37.50
25,125
FACTORY OVERHEAD VARIANCE:
3 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH 553,750
Variable FOH 424,500
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH 553,750
Variable FOH 424,500
Standard Total FOH rate = (618,750 + 412,500) / 16,500 hours = Rs. 62.
3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours worked x 15800
Total Standard Factory overhead rate 62.5
100,000 Unfav.
120,000 Unfav.
25,000 Fav
195,000 Unfav.
Unfav
Unfav
U
Fav
978,250
1,013,750
35,500 Fav
1,013,750
987,500
26,250 UnFav.
987,500
1,010,625
23,125 Fav
987,500
n Expected output:
968,750
18,750 Unfav
n Expected output:
968,750
n Actual output:
1,010,625
41,875 Fav
consumption
978,250
1,013,750
35,500 Fav
1,013,750
987,500
26,250 Unfav
987,500
1,065,625 -
78,125 Fav.
1,065,625
1,010,625
55,000 Unfav
1 Company is cement producing company.
2 2major component mixing - A (Lime) and B (Clay) + Water + 3rd component C(insignificant)
3 Data is for 100 output:
5 To convert 110 tons into 100 tons, 500 labor hours at Rs. 37.50 per ton. FOH is applied on D/L
8 No WIP at start and material price variance is recorded at the time of purchases.
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
670
Standard r 37.50
25,125
1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH 553,750
Variable FOH 424,500
3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours worked x 15800
Total Standard Factory overhead rate 62.5
H is applied on D/L
MPV
100,000 Unfav.
120,000 Unfav.
25,000 Fav
195,000 Unfav.
andard price
Standard MMV
Price
Standard price
Standard MYV
Price
2,150 158,455 Fav
196,295 Unfav
565,180 Fav
105,325 Unfav
263,560 Fav
Unfav
Unfav
Fav
978,250
1,013,750
35,500 Fav
1,013,750
987,500
26,250 Unfav
987,500
1,065,625 -
78,125 Fav.
1,065,625
1,010,625
55,000 Unfav
W-1: Actual cost of material
Proof:
Input 281,444
Less: 10% wastage (28,144)
Actual Production (output) 253,300
Direct material total variance = Difference between Standard and Actual Cost of materia
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
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
Difference 16,000
Standard Rate 1.50
Formula: Difference between Standard and Actual rate x Actual quantity purchased
(2,100,310)
849,690
(651,000)
198,690
Unfav
per lbs
Unfav
13,760 / 8.16)
nce
114,000
181,500 295,500
114,000
165,000 279,000
16,500 Unfav
279,000
286,000
7,000 Fav