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STANDARD COSTING WITH SOLUTIONS
Question 1: Calculate Material Price Variance and Material Usage Variance:

Standard (1 FG)
Actual (1 FG)
Amount (`)
Kg
Rate
Kg
Rate
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
Actual: Output
Materials used
` 1 per Kg
Cost of materials
` 2,52,000
2,10,000 Kg
2,80,000 Kg
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)
Amount (`)
Qty.
Rate
3,00,000 kg
1
3,00,000
Actual (Output 2,10,000 kg)

Amount (`)
Qty.
Rate
2,80,000
0.90
2,52,000
Statement of Variance
Sl. No.
Particulars
1.
Material Usage Variance
2.
Material Price Variance
3.
Material Cost 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
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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
Standard
40 units @ ` 50 per unit
A
B
Solution:
Item
Actual
60 unit @ `45 per unit
Data for Material Variances

Standard
Qty.
Rate
Amount
Item
Actual
Qty.
Rate
(` )
A
B
40
60
50
40
Amount
(` )
2,000
2,400
4,400
A
B
50
60
110
50
45
2,500
2,700
5,200
Statement of Variances
Sl. No.
Particulars
1.
2.
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
Amount (`)
300 (Adverse)
500 (Adverse)
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)
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Question 4: From the following information, compute (a) Cost Variance (b) Price and (c) Usage
Variance.
Material A
Material B
Material C
Total
Quantity
10
20
20
50
Standard
Unit Price
2
3
6
4
Total (`)
20
60
120
200
Quantity
5
10
15
30
Actual
Unit Price
3
6
5
5
Total (`)
15
60
75
150
Solution:
Data for Material Variance

Budgeted/Standard (1 FG)
Amount
Item
Actual (1 FG)
Qty.
Rate
Amount
(` )
A
B
C
10
20
20
2
3
6
(` )
20
60
120
A
B
C
200
5
10
15
3
6
5
15
60
75
30
150
Sl. No.
1.
2.
Particulars
3.
Amount (`)
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)
70 (F)
50 (F)
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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
B
`4.00
40%
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
(` )
A
B
40
60
100
4
3
160
180
340
Amount
Qty.
Rate
Amount
(` )
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
Amount (`)
Sl.
Particulars
Basis
1. Material Price Variance (S.P. A.P.) A.Q.
A: (4 4.2394) 830 = 199 (A)
B: (3 2.5168) 1190 = 575 (F)
376 (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)
90 (A)
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)
68 (A)
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)
22 (A)
5. Material Cost Variance Material price variance + Material Usage Variance
286 (F)
376 (F) + 90 (A)
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
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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
Price (` per kg)
Direct Materials
Qty. (kg)
A
B
C
600
400
500
1
2
3
During December 1991, eight mixes were processed and actual materials consumed were as follows:
Price (` per kg)
Direct Materials
Qty. (kg)
A
5,000
2
B
2,900
4
C
4,400
5
Actual production for December was 6,20,000 tiles.
Solution:
Materials
Budgeted (80,000)
Materials
Qty.
A
B
C
600
400
500
1500
(` )
Qty.
Rate
600
800
1,500
2900
4,650
3,100
3,875
1
2
3
Rate
1
2
3
Standard (6,20,000)
(`)
4,650
6,200
11,625
22,475
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
(` )
10,000
11,600
22,000
43,600
S.. No.
1.
Particulars
(M.P.V.)
2.

(M.U.V.)
3.
Material Mix Variance
4.
5.
Material Yield Variance
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)
Amount (`)
19,600 (A)
1,525 (A)
220 (A)
1,305 (A)
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
Qty. (kg)
Raw material purchases
Issue to works
Works stock of material:
Opening
2,000 kg
2,150 kg
Value
Qty. (kg)
` 4,000
5,000
3,950
300 kg
Closing
Value
` 6,250
1,000
200 kg
1,250
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.
Solution:
Data for material variance

Budgeted/Standard
Amount (`)
Raw Material Qty. (W.N. 1)
Rate
X
Y
2,405
3,680
1.90
1.30
4,569.50
4,784.00
Qty. (W.N. 2)
Standard
Rate
2,250
3,700
2.00
1.25
Amount (`)
4,500
4,625
Sl. No.
Particulars
1.
2.
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)
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
2,450
200
() Closing stock at works

Actual consumption
4,950
1,250
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
A
B
C
Qty
Rate
2,000
800
20
1
1.5
30
Amount (`)
1 lot
A
B
C
Qty
3,01,000
1,20,400
3,010
150 lot
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
Qty
2,000
1,200
600
3,00,500
1,19,600
3,100
3,800
150.5 lot
Standard
Rate
1
1.5
30
Rate
Amount (`)
1.1
1.65
29.5
3,30,550
1,97,340
91,450
6,19,340
Amount (`)
3,01,000
1,80,600
90,300
5,71,900
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).
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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
A
B
Actual
Qty.
(kg)
Rate
(`/kg)
Amount
50
50
12
15
600
750
100 for 90G
(`)
1,350
Standard
Ratio for
Actual Mix
Qty. (kg)
55
55
110
40
70
Rate
(`/kg)
Amount
15
20
600
1,400 (B.f.)
(` )
110 (W.N. 2)
2,000
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
5.
6. Question 12:
1.
3.
4. Standard Wages:
2. Actual
Wages:
= 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
= (110 90) = ` 20/kg
5. Actual Input of Chemical A = 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
-------------------------------------------------------------------------------------------------------------------
The following information is provided.

Grade X: 90 Labourers at ` 2 per hour
Grade Y: 60 Labourers at ` 3 per hour
Grade X: 80 Labourers at ` 2.50 per hour
Grade Y: 70 Labourers at ` 2.00 per hour
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:
Data for Labour Variances

Budgeted (4000)
Material
X
Y
Lab. Hrs
90 1,000 =
90,000
60 1,000 =
60,000
Rate
Standard (4100)
Amount Lab. Hrs
Rate Amount
`/hr
(`
(W.N. 2)
1,80,000
92,250
1,84,500
1,80,000
61,500
1,84,500
3,60,00
1,53,750
1,50,000
Actual (4100 units)

Lab. Hrs
Rate Amount
(`)
3,69,000
(`)
80 900 =
72,000
70 900 =
63,000
1,35,000
2.50
2.00
1,80,000
1,26,000
3,06,000
Sl. No.
Particulars
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
Budgeted (Units)
5,000
1,000
(20% of 5,000)
4,000
Gross Production
() Loss (Normal)
Net Production
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
4100 F.G. =
Y:
4,000 F.G.
1 F.G
4100 F.G =
90,000 LAbour Hrs.

4,000
90,000
4,000 X 4,100 Labour Hr.
= 92,250 Labour Hrs.
= 60,000 Labour Hrs.
60,000 LAbour Hrs.

4,000
60,000 X 4,100 Labour HRs.
4,000
= 61,500 Labour Hrs
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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)
Men
Women
Lab Hr.
Rate
400
200
1
2
Revised Budgeted (960)
Amount Lab Hr.

(`)
400
384
400
192
600
Rate
1
2
Amount
(`)
384
384
576
Actual (960)
Lab Hr.
Rate
520
160
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.
Particulars
1. Labour Cost Variance
Amount (`)
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)
2. Labour Rate Variance
3. Labour Efficiency Variance
1,456 (A)
1,600 (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)
4. Labour Idle Time Variance
(Idle Time S.R.)

Men: 13 2 1
Women: 4 2 2
Boys: 3 2 3
204 (F)
= 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
Category or
No. of Labourers Weekly wage rate
No. of
Workers
`
Labourers
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.
Solution:
70
30
80
Actual
Weekly wage rate
`
per Labourer ( )
70
50
20
Data for Labour Variance
Category
Budget/Revised
Actual
Category
Time
Rate
Amount
Standard Ratio for
(`/week)
(`)
Skilled
Semi-skilled
Unskilled
(weeks)
2,250
1,350
1,800
60
40
30
1,35,000
54,000
54,000
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
5400
2,43,000
Qty.
Rate
Amount
(`)
2,240
960
2,560
5,760
5,760
70
50
20
1,56,800
48,000
51,200
2,56,000
Statement of Labour Variances

Sl.
No.
1.
2.
3.
4.
5.
Particulars
Amount (`)
Basis
Labour cost
variance
Standard Cost Actual Cost

2,43,000 2,56,000 = 13,000 (Adv.)
Labour rate
variance

Skilled: (60 70) 2240
Semi-skilled: (40 50) 960
Unskilled: (30
13,000 (A)
= 22400 (A)
= 9600 (A)
= 25600 (F)
Labour
efficiency
variance
(S.Q. A.Q.) S.R

Skilled: (2,250 2,240) 60
Semi-skilled: (1,350 960) 40
Unskilled: (1,800 2,560)
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)
Labour
yield
variance
6,400 (A)
= 600 (F)
= 15,600 (F)
= 22,500 (A)
6,600 (A)
9,600 (F)
(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)
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
Variable Overheads (in `)
10,000
9,150
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)
Labour
Hrs
Rate
8,000
1.25
Amount
(`)
10,000
Standard (360 FG)

Hrs
Rate
Amount
7,200
1.25
9,000
Actual (360 FG)

Hrs
Rate
7,000
1.3071
`)
Amount
(`)
9,150
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:
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
= Total fixed Budget Oh
6,000
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
` 5,000 ` 5,600
Recovered Budgeted
` 3,500 ` 5,000
Recovered Actual
Amount
600 (A)
1500 (A)
2100 (A)
--------------------------------------------------------------------------------------------------------------------------------------
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
Budgeted overhead = `10,000

Actual overhead = ` 12,500.
Required: Calculate the fixed overhead volume and Exp variance.
Actual Output
A
C
D
F
G
Solution
:
Question30:
Statement of fixed overhead variances

Sl. No.
Particulars
1.
Fixed overhead expenditure variances
2.
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.
-------------------------------------------------------------------------------------------------------------------------------------------------------
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 fixed overheads variance
Sl.
1.
Particulars
Efficiency variance
Basis
(S. Hr A.W.Hr) R.R
= (21.220 21,840) 6
Amount (`)
3,720 (A)
2.
Revised Capacity variance
Total Cap. variance Calendar Variance

12,960 5,760 (W.N. 1)
18,720 (A)
3.
Calendar variance
(Actual days Budgeted days) Standard

Rate/day
= (26 25) 5,760 = 5,760
5,760 (F)
4.
Expenses variance
Budgeted Actual
1,44,000 1,42,000
2,000 (F)
5.
Volume variance
Recovered Budgeted
1,27,320 1,44,000
16,680 (A)
6.
Total fixed overhead variance
Recovered Actual
1,27,320 1,42,000
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.
Particulars
Basis
Amount (`)
1.
Fixed OH Volume Variances
Recoverd Budgeted
1,300 1,200
100 (F)
2.
Fixed OH Expenditure Variances
Budgeted Actual
1,200 1,250
50 (A)
3.
Fixed OH Cost Variance

Recovered Actual
1,300 1,250
50 (F)
4.
Fixed OH Efficiency Variance
(S. Hrs A.W.Hrs) Recovery Rate

= (3,250 3,300) 0.40
20 (A)
Fixed OH Capacity Variance
(A.W.Hrs Bud. Hrs) Recovery Rate

= (3,300 3,000) 0.40
120 (F)
6.
Fixed OH Calendar Variance
(Actual Work Days Budgeted days) R.R./day

1,200
_____
= (27 25)
25
96 (F)
7.
Fixed OH Balanced
Capacity Variance
Total Capacity Variance Calendar Variance

= 120 Fav. 96 Fav.
24 (F)
8.
Variable OH Variable
Standard variable OH for Actual Output Actual

variable OH Actual Output
6,000
_____
=
6,500 6,650
6,000
= 6,500 6,650
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
600 (A)
2. Fixed OH Variance
Recovered Actual
38,000 39,000 = 1,000
1,000 (A)
3. Fixed OH Expenditure Variance
Budget Actual
40,000 39,000
1,000 (F)
4. Fixed OH Volume Variance
Recovered Budged
38,000 40,000
2,000 (A)
5. Fixed OH Efficiency Variance
(Standard Working Hr Actual Working Hour) R.R./hr.

(152 168) ` 250/hr.
4,000 (A)
6. Fixed OH Calendar Variance
(Actual Working days Budgeted Working days) R.R. per

day
40,000
______
(21 20)
2
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.
Overhead Expenditure Variance
W.N. 1
400 A.
2.
Actual Overhead incurred
W.N. 2
6,400
3.
Actual Hours for Actual production
800 hrs.
4.
Overheads Capacity Variance
Actual Overhead
_______________
Actual Rate
(Actual hrs worked) Recvoery Rate
6,000
_____
(800 1,200)
1,200
2,000 (A)
(Standard Hr. Act. worked Hr.) R.R.

(1,000 800) 5
1,000 (F)
W.N. 3
1,000 hrs.
5.
Overheads Efficiency Variance
6.
Standard hours for actual production
---------------------------------------------------------------------------------------------------------------------------------------
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
` 270
36 hr @ `8.25/hour
` 297
36 hr @ `4.75/hour
`` 171
` 738
Standard output per month
24,000 units
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
Budgeted (1 FG)
Qty.
Rate
Amount
Standard (21,000)
Qty.
Rate
(`)
Mat (kg)
Labour (hrs.)
V OH (hours)
Sl.
No.
0.6
0.36
0.36
4.50
8.25
4.75
Particulars
2.7
2.97
1.71
Amount
Actual (21,000)
Qty.
Rate
Amount
(`)
12,600
7,560
7,560
4.50
8.25
4.75
56,700
62,370
35,910
(`)
13,000
7,920
7,920
Basis
4.70
8.45
4.545
61,100
66,924
36,000
Amount
(` )
1.
(4.50 4.70) 13,000

(S.P. A.P.) A.Q.
2,600 (A)
2.
(S.Q. A.Q.) S.P.

(1,26,00 13,000) 4.50
1,800 (A)
3.
S.C. A.C.
56,700 61,100
4,400 (A)
4.
Labour Rate Variance
(S.R. A.R.) Actual Working Hours

(8.25 8.45) 7920
1,584 (A)
5.
Labour Efficiency Variance
(Standard Hrs. Actual Working Hours) . S.R.

(7,560 7,920) 8.25
2,970 (A)
6.
Labour Cost Variance
S.C. A.C.
62,370 66,924
4,554 (A)
7.
Variable OH Expenditure Variance
(S.R. A.R.) Actual Working Hours

(4.75 4.545) 7,920
1,626 (F)
8.
Variable OH Efficiency Variance

(Standard Hrs. Actual Working Hours) S.R.
(7,560 7,920) 4.545
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:
Amount (`)
Particulars
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.
3,500
7,000
7,000
Rate Amount (`)

50
1,75,000
3
21,000
10
70,000
Actual (3,500)
Qty.
3,600
6,800
6,400
Rate
52.50
3.25
9.6875
Amount (`)
1,89,000
22,100
62,000
1.
S.C. A.C.
1,75,000 1,80,000
1400 (A)
2.
Material price Variance
(S.R. A.R>) X AQ
(50 52.50) X 3600
9000 (A)
3.
Material usage Variance
(S.Q. A.Q.) X S.R.

(3,500 3,600) X 50
5,000 (A)
4.
Labour Cost Variacne
S.C. A.C.
21,000 22.100
1,100 (A)
5.
Wage Rate Variance
(S.R. A.R>) X A.P. Hrs

(3 3.25) X 6,800
1,700 (A)
6.
(S.Hrs A.W. Hrs) X S.R

(7,000 6,400) X 3
1,800 (F)
7.
Idle time Variance
1,200 (A)
8.
Variable Expenses Variances
Idle Hrs. X S.R.

(400 X 3)
S.C> -A.C.
70,000 62,000
Fix OH Expenditure Variance
10
FIx OH Volumne Variance
11
Fixed Exp.(OH) Capacity Variance
12
Fixed Expenses(OH) Efficiency Variance
13.
Total Cost Variance
8000 (F)
Budget Actual
1,92,000 1,88,000
Recovered Budget
1,40,000 1,92,000
4000(F)
52,000(A)
(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
64,000 (A)
12,000(F)
---------------------------------------------------------------------------------------------------------------------------------------
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
12.00
Direct labour: 1 hour @ ` 4.40 per hour
4.40
Variable overhead: 1 hour @ ` 3 per hour
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
27,950
Variable overheads incurred
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 figures and work out all the relevant variance.
Solution:
Budgeted (1 FG)
Mat (Meter)
Labour (hrs.)
V OH (hrs.)
Qty.
Rate
2
1
1
6
4.40
3
Amount (`)
12
4.40
3
Standard (6,000)
Qty.
Rate
12,000
6,000
6,000
6
4.40
3
Amount (`)
72,000
26,400
18,000
Actual
Qty.
12,670
6,500 (W.N. 1)
6,500 (W.N. 1)
Rate
5.70
4.3
3.15
Amount (`)
72,215
27,950
20,475
1.
(S.R>- A.R>) X A.Q.

(6 5.70) X 12,670
2.
(S.R> - A.R> ) X A.Pay Hr

(4.40 4.30) X 6,500
3.
Variable OH Expenditure Variance
(S.R> -A.R.) X A.W. Hr

(3 3.15 ) X 6,500
3,801 (F)
650 (F)
975 (A)
4,020(A)
4.
(S.Q. A.Q>) X S.R.

(12,000 12,670) X 6
2,200(A)
5.
(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.
9.
Variable OH Cost Variance
S.C. A.C.
72,000 72,215
1,550(A)
S.C. A.C.
26,400 27, 950
S.C A.C.
18,000 20,475
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
`3
Actual total direct material cost
` 10,000
Standard direct labour hours

Actual direct labour hours
1,600
1,800
Total standard direct labour cost
` 8,000
Standard variable overhead per direct labour hour
`1
Standard variable overhead per unit of ZED
` 1.60
Total standard variable overhead
`1,600
Actual total variable overheads
`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
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
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
LAbour Rate Variance
(S.R. -A.R.) X A. Day. Hrs
( 5 5.25 ) X 1,800
Labour efficiency variance
S. Hrs A.W. Hrs ) X S.R.
(1,600- 1,800) X5
Varaicne OH Expenditure Variance (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)
( 1 0.90) X 1800
(S. Hrs A.W. Hrs) X S.R.
1600 1800) X1
Variable OH Efficiency variance
200(A)
Working Notes:
1. Data for Resource Variance
Standard/Budget (1,000 FG)
Qty.
Rate
Actual (1,000 FG)
Amount Cost per Unit
Qty.
Rate
(`)
Material
Labour hours
Variable overhead hours
3,800
1,600
1,600
3
5
1
11,400
8,000
1,600
Amount
Cost per unit
(` )
11.4 (B.f.)
8
1.6
4,000 (W.N. 2)
1,800
1,800
2.5
5.25
0.90
10,000
9,450
1,620
21
10
9.45 (B.f )
1.62
21.07(W.N.3)
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:
Data for Variance

Budgeted
Qty.
Rate
Standard
Amount
Qty.
Rate
Actual
Amount
(`)
Material
Labour
Variable overhead
4
2
2
0.75
1.9
1.2
Qty.
Rate
(`)
3 1,78,000
3.8 76,000
2.4 76,000
0.75
1.9
1.2
1,33,500
1,44,400
91,200
Amount
(``)
1,54,000 0.7
78,000
2.1
78,000
1.141
1,07,800
1,63,800
89,000
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
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
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.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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:
(` )
15.00
10.00
7.50
32.50
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
The following data was obtained from Zed Companys record for April 1998
Particulars
Debit
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
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
Materials
Direct labour
Variable overheads
Per unit
5 kgs at ` 2
` 10
12 hours at ` 2
`24
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
Amount (`)
Direct material used (8,500 kg)

Direct wages (20,000 hours)
Variable Overhead
Fixed overhead
17,200
42,000
22,000
9,800
Net profit
91,000
4,000
Sales
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.
Particulars
Basis
(S.R. A.R.) A.Q.
(2 2.0235) 8,500
Amount
200 (A)
2.
(S.Q. A.Q.) S.R.

(9,000 8,500) 2
1,000 (F)
3.
800 (F)
4.
S.C. A.C.
(18,000 17,200)
(S.R. A.R.) Actual Payment Hours
(2 2.1) 20,000
5.
2,000 (A)
3,200 (F)
6.
(S.Hr Actual Working Hours) S.R.

(21,600 20,000) 2
S.C. A.C.
43,200 42,000
7.
V OH Expenditure variance (S.R. A.R.) Actual Working Hours

(1 1.1) 20,000
2,000 (A)
8.
Variable OH Efficiency
variance
(Standard Working Hours Actual Working

Hours) S.R.
(21,600 20,000) 1
1,600 (F)
9.
Variable overhead cost

variance
S.C. A.C.
(21,600 22,000)
400 (A)
10.
Fixed overhead expenditure

variance
Budgeted Actual
(10,000 9,800)
200 (F)
11.
Fixed overhead volume

variance
Recovered Budgeted
(9,000 10,000)
12.
Fixed overhead cost

variance
Recovered Actual
(9,000 9,800)
1,200 (F)
1,000 (A)
800 (A)
(b) Statement of Bonus

Particulars
Amount (`)
(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)
150
1,600
Total Bonus payable

Working Notes:
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
Budgeted fixed-overhead
10,000
Actual Hrs.
20,000
or
`` 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
A
B
Budgeted
Selling Price
Standard Cost
Per unit
per unit
(`)
60
40
20
10
15
4
Actual Sales
Quantity Units
Actual Selling
Price per unit
44
66
Actual Cost
Per unit
(`)
(`
25
5
16
5
Required:
1. Calculate all the sales variances
(a) on sales value basis
(b) on sales margin value basis
2. Reconcile the standard profit with actual profit.
Solution:
Data for Sales Variance

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

Sl.
1.
2.
3.
4.
5.
Particulars
Sales Value Variance
Sales Price Variance
Sales Volume Variance
Sales Mix Variance
Sales Yield 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)
Amount
170 (A)
110 (A)
60 (A)
220 (A)
160 (F)
Reconciliation Statement
Budgeted profit
540
Adjust Sales Variance:

110 (A)
60 (A)
Sales price variance

Sales Volume Variance
Adjust cost variances:
26 (F)
(1060 1034)
Actual profit
396
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
Sales Value
Actual
1,200
400
1,600
(1,060)
900
160
1,600
(1,060)
540
Sales Value
A: 44 25
B: 66 5
Sales Value
A: 44 25
B: 66 5
Less: Cost
Sales Value
1,100
330
1,430
(1,034)
704
330
1,430
(1,034)
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
2
4
1
A
B
C
Y Units
3
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
Actual Sales
Rate (`)
Amount(`)
12
15
9
1,20,000
90,000
72,000
2,82,000
Oty.
Units
11,000
5,000
9,000
25,000
Rate (`)
Amount `
11.50
15.10
8.55
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
Actual Margin
Actual Quantity X
Budgeted Price (``)
Product
A
B
C
Qty.
Units
10,000
6,000
8,000
24,000
Rate (`) Amount (`)

5
6
3
50,000
36,000
24,000
Qty.
Units
11,000
5,000
9,000
1,10,000
25,000
Rate (`)
4.50
6.10
2.55
Amount (``)
49,500
30,500
22,950
55,000
30,000
27,000
1,02,950
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
X
Y
Standard Cost
Qty
Units
51,000
74,000
1,25,000
Actual Cost
Rate (`)
Amount (`)
2
1
Actual quantity
Standard price
Amount (`)
1,02,000
74,000
Qty.
Units
54,000
72,000
Rate Amount (`)
1,09,620
73,000
1,08,000
72,000
1,76,000
1,26,000
1,82,620
1,80,000
---------------------------------------------------------------------------------------------------------------------------------------
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
`1,78,000
Current
Opening Cost
Total
Qty. (WN1) (B)
Overhead
` 90,000
` 12,000
`5,000
` 1,90,000
` 95,000
1,000
` 190
Rate (` p.u) (A) (B)
1,000
` 95
(a) Calculation of Actual cost of closing W.I.P.

Labour (190 100)
Overhead (95 100)
19,000
9,500
28,500
Standard Cost
(b)
Labour: 5 Hrs X 40
200
Overhad: 5 hHR X 20
100
300
(d) Statement of Variances

Sl. No.
Particulars
1.
2.
3.
4.

Overhead Volume Variance
Overhead Budget/Expenditure
Variance
Basis
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)
30,000 (A)
3,000 (A)
8,000 (F)
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
Labour
900
125
1,025
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
Overhead
150
700
100
150
700
100
950
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.
Solution:
S.NO. Particulars
Basis
3000(A)
Material usage variance
Material cost variance
Labour Rate variance
Labour Efficiency variance
Labour cost variance
Fixed overhead efficiency variance
Fixed overhead capacity variance
10
Fixed overhead expense variance
11
Fixed OH
Cost variance
(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
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%)
Introduced
250 Opening
250
1,400 Current
950
Transferred
1,200
Closing W.I.P. (80%)
450
1,650
1,650
Labour & Overhead
950
100
950
450
90
1,400
1,140
(Actual output for material) (Actual output for labour)
Working Note 2
Material (kg) (1,400)

Labour (1,140)
Working Note 3
Standard
Qty.
Rate
Amount
(` )
2,800
10
28,000
3,420
20
68,400
Qty.
2,900
3,300
Actual
Rate Amount
(` )
11.034
32,000
20.60
68,000
300 units
Materials 100% complete
Labour and Overheads 60% complete

200 units
Materials 50% complete
Labour and Overhead 40% complete
-------------------------------------------------------------------------------------------------------------------------------------------------------
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
36.00
Direct Labour 3 hrs @ ` 4 per hr
12.00
Factory Overheads
Total
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
Closing WIP
Required: Analyze the variances
Solution:
Sl. No.
Particulars
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Variable Overhead Expenditure Variance
Variable Overhead Efficiency Variance
Fixed overhead expenditure variance
Fixed overhead efficiency variance
Fixed overhead capacity variance
Labour rate 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)
2,256 (A)
550 (F)
(S.R. A.R.) A.W.Hr

(2.4 2.6) 22,400
4,480 (A)
(S.Hr A.W.Hr) S.R.

(22,560 22,400) 2.4
384 (F)
Budget Actual
38,400 38,200
200 (F)
Recovered Budget
36,096 38,200
(S.Hr A.W.Hr) S.R.
(22,560 22,400) 1.6
2,304 (A)
256 (F)
(Bud. Hr. A.W.Hr) S.R.

(24,000 22,400) 1.6
2,560 (A)
(S.R. A.R.) A.Pay. Hrs

(4 4.3) 22,400
6,720 (A)
(S.Hr A.W.Hr) S.R.

(22,560 22,400) 4
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
Opening
Current
Transferred
Closing W.I.P. (50%, 40%)
7,820
300
7,320
7,620
200
7,320
120
7,320
100
7,820
80
7,420
7,520
Working Note 3
Particulars
Standard
Qty.
Material
Labour
Variable overhead
7,420 1.5 = 11,130

7,520 3 = 22,560
7,520 3 = 22,560
Rate
Actual
Amount (`)
24
4
7.2 = 2.4
3
Qty.
2,67,120
90,240
54,144
11,224
22,400
22,400
Amount (`)
Rate
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:
`6.45
3.50
6.00
1.00
4.00
` 9.50
` 5.00
`20.9
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:
Journal Entry (Under Single Plan) in Department A

Particulars
Amount (``)
Amount (`)
1. Material Control A/C

Material Price Variance A/c
To creditors A/c
(Being Material purchased)
2. Creditors A/c
To Bank
Dr (S.R. A.Q)
Dr (S.R. A.R.) A.Q.
18,490
3,010
21,500
Dr
21,500
21,500
3. W.I.P. Control A/c

Material Usage Variance A/c.
To Material control A/c.
(Being goods issued to production)
Dr (S.Q. A.R.)
(S.Q. A.Q.) A.R.
(A.Q. A.R.)
18,060
430
4. Wages Control A/c.

To wages payable A/c.
(Being labour expenses due)
Dr (S.R. A.W.Hr)
(S.R. A.P.Hr)
9,100
5. Wages payable A/c.

To Bank A/c
Dr
9,100
18,490
9,100
9,100
6. W.I.P. control A/c

To wages control A/c
To labour Efficiency variance A/c
Dr.

Overhead cost variance A/c
To Bank
Dr
Dr
9,800
9,100
700
2,800
200
3,000
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

Amount (`)
Amount (`)
Particulars
To Department A A/c.
Dr
2. Wages Control A/c

Labour Rate variance A/c
To wages payable A/c
Dr
Dr
3. Wages Payable A/c

To Bank
Dr

Labour Efficiency variance A/c
To wages control A/c
Dr
Dr

Overhead cost variance A/c
To Bank
Dr
Dr
30,660
30,660
18,000
Nil
18,000
18,000
18,000
16,800
1,200
18,000
11,200
1,300
12,500
---------------------------------------------------------------------------------------------------------------------------------------
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
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 cost accounts recorded the following variances for the year:
Favourable (`)
Adverse (`)
Variances
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 profit and the actual profit.
Solution:
Statement showing standard cost sheet per unit and Original Budget
Particulars
Standard cost per

unit (`)
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)
Original Budget (`)

5,000 units
6
9
15
7.5
30,000
45,000
75,000
37,500
37.5
7.5
1,87,500
37,500
45
2,25,000
Statement of Reconciliation (Marginal)

Particulars
Budgeted Profit
Sales Variance:
Price Variance
Volume Variance:
Amount (`)
37,500
(B.Q. A.Q.) (F.C. + Pro. P.U.)

200 (7.5 + 7.5)
6,750 (F)
3,000 (A)
Cost Variances:
Material Cost Variance:
Material price variance

300 (A)
Material usage variance
600 (A)
Labour Cost Variance:
Wage rate variance
750 (F)
2,250 (A)
Variable Overhead Cost Variance: Variable overhead expenses 3,000 (F)
Variable overhead efficiency variance
3750 (A)
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
Actual
4,800
45
30
15
72,000
37,500
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
Reconciliation Statement
Ist Year
6,00,00,000
100
6,00,000
Particulars
Basis
` in lakh
40
Budgeted Profit
Sales Variance
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
Cost Variance

Recovered Overhead Budgeted Overhead (93.33 80)
(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.
70 (F)
6.66 (F)
13.33 (F)
70 (A)
13.5 (F)
12.5 (F)
7 (A)
10 (F)
4 (A)
5 (F)
Actual Profit
90
Working Notes:
Budget
Material
Material
Labour
Variable Overhead
Qty.
1,20,000
24,00,000
24,00,000
Standard
Rate (` in lakh)
Qty.
Amount
250
300
1,40,000
5
120
28,00,000
2.5
60
28,00,000
480
Actual
Rate (` in lakh)
Amount
250
350
5
140
2.5
70
540
Rate
(` in lakh)
1,35,000
240
26,00,000 5.269
26,00,000 2.65
Amount
324
137
69
Qty.
530
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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.)
Amount
Amount
28
27
20
47
14
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
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:
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
Qty.
13,500
10,000
14,000
7,000
44,500
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).
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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:
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
Fruit extract
400 kg @ ` 1 per kg
Glucose syrup
700 kg @ ` 2 per kg
Pectin
99 kg @ ` 1 per kg
Citric acid
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.
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:
Material
Fruit Extract
Glucose
Syrup
Pectin
Citric Acid
Original Standard
(` )
Qty.
Rate
400
700
99
1
1,200
18
Labour
1
2
1
5
2
Revised Standard
(` )
Qty.
Rate
400
1,400
400
700
99
5
99
1
1,904
36
1,940
1,200
18
2
24
1
5
2
Qty.
Actual
Rate
(` )
800
1,680
428
742
4
5
1,712
3,710
99
5
125
1
2
6
250
6
2,584
36
2,620
1296
20
5,678
80
5,758
(a) Statement of Uncontrollable Planning Variances

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

Amount (`)
Budgeted Contribution
Sales Variances
(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)
Cost Volume Variance
1,95,000
27,300 (F)
24,937.5 (F)
51,737.5 (A)
1,95,500
PArticulars
(b) Statement of Variances

Traditional Variances
Planning Variacnes( Operating
(original Actrual
original standard
variances(Revised
Standard)
Revised standards) stand- Actual)
1:- MAteiral Cost Variance
2,28,000-2,24,100 =3900(F)
2:- Material Price Variacne
5:- Labour Rate variance
(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)
6:- Labour Efficiency

Variances
Total Variances
(17,100-18,800) X7 =
11,900(A)
29,800(A)
3:- Material Usage variance

4:- Labour Cost varaince
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)
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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
T-shirt 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
`15
Average selling price

Average cost per T-shirt
Administrative capacity in terms of number of customers that can be served
Administrative costs
Administrative cost per customer
` 10
` 14
`9
40,000
36,000
`80,000
` 68,400
`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)
Profit
Growth
Price
Productivity
Current Year
Revenue 2,94,000
Less: Cost
Material 2,00,000
Others 80,000
Profit 14,000
A. 1,51,500 (F)
C. 29,700 (A)
4,15,800
B. 1,03,060.4 (A)
D. 30,000 (F)
E. 11,600 (F)
11,900 (F)
F. 3,061 (F)
2,70,000
68,400
77,400
48,440 (F)
3,061 (F)
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.
Working Notes:
Material
Qty.
Budget
Rate
20,000
10
(` )
Qty.
2,00,000 30,306.12
Standard
Rate
10
(` )
3,03,061
Qty.
30,000
Actual
Rate
9
(` )
2,70,000
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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
1. Units of KE8 produced and sold

2. Selling price
3. Direct materials (square feet)
4. Direct material cost per square foot
5. Manufacturing capacity for KE8
6. Conversion costs
7. Conversion cost per unit of capacity (Row 6 Row 5)
8. Selling and customer-service capacity
9. Selling and customer-service costs
40,000
` 100
42,000
` 110
120,000
123,000
` 10
` 11
50,000 units 50,000 units
` 1,000,000
` 20
` 1,100,000
` 22
30 customer29 customer
` 725,000
10. Cost per customer of selling and customer-service capacity (Row 9 ` 720,000
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.
Required:
Describe briefly 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)
` 4,000,000
` 4,620,000
1,200,000
1,353,000
1,000,000
1,100,000
720,000
725,000
2,920,000
3,178,000
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
` 1,080,000
`362,000 F
Change in operating income
`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
` 60,000 (A)

Conversion costs
0
0
` 200,000 (F)
60,000 (A)
` 140,000 (F)
Change in operating income due to growth
Price-Recovery Component of Operating-Income Change

Revenue effect of
price recovery
Cost effect of =
price recovery
= Selling price
in 2006
Selling price
in 2005
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:
` 420.000(F)
Revenue effect of price recovery
Cost effect of price recovery
`126,000(A)

Conversion costs
100,000(A)
30,000(A)
Change in operating income due to price recovery
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:
Conversion 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
and
Cost
Effects
of Growth
Component
in 2006
(1)
Revenue
4,000,000
Costs
2,920,000
Operating income ` 1,080,000
Revenue
Cost Effect of
and Cost
Productivity
Effects of
Component
Price-Recovery in 2006
Component
in 2006
(2)
`
(3)
(4)
200,000 (F) 420,000 (F)

60,000 (A) 256,000 (A)
` 140,000 (F) ` 164,000 (F)
Income
Statement
Amounts in
2006
(5) = (1) + (2) + (3) + (4)
` 58,000 (F)
` 58,000 (F)
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.
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Question 73: The CEO of your company has been given the following statement showing the
results for a recent month:
Particulars
Master Budget
10,000
`
Units produced & sold

Sales
Direct material
Direct Wages
Variable overhead
Fixed overhead
Total cost
Net Surplus
Actual
9,000
`
8,00,000
2,00,000
3,00,000
1,00,000
1,00,000
7,00,000
1,00,000
7,00,000
1,84,000
2,62,000
94,000
98,000
6,38,000
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
Master Budget
10,000
Total (`)
Budget
9,000
Per Unit (`)
Flexible
Actual
Variance
9,000
Total (`)
(`)
20,000 (A)
8,00,000
80
7,20,000
7,00,000
Direct Material
Direct Wages
Variable Overhead
3,00,000
1,00,000
30
10
2,70,000
90,000
2,62,000
94,000
Total Variable Cost
6,00,000
60
5,40,000
5,40,000
Contribution
Fixed Overhead
2,00,000
1,00,000
20
10
1,80,000
1,00,000
1,60,000
98,000
20,000 (A)
2,000 (F)
Net Profit
1,00,000
10
62,000
18,000 (A)
80,000
8,000 (F)
4,000 (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.
72,000
48,000
Material B 12,000 kgs @ ` 4 per kg
2,40,000
Wages 60,000 hours @ ` 4 per hour
60,000
1,20,000
5,40,000
60,000
6,00,000
12,000
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
Amount ( )
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
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, fixed 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.
Materials
% age
Units
100%
9,000
100%
900
9,900
Equivalent Units
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
Fixed Overhead expenditure

variance
Std absorption Rate =
2000/10000
Fixed Over head volume
variance
Actual
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)
1,760/8,800 = 0.2
Overhead actual overhead
=0.2X (10,000-8,800)=240(A)
Varification:
Total Fixed Overhead variance
= Expenditure Variance + Volume Variance

= 240(F) + 240(a) = 0
(ii)
Total Cost(`)
Production (units)
No. of batches
Batch Size (units/batch)
Cost/batch
Budget
Actual
ABC Standard
2000
10000
10
1000
200
1760
8800
11
800
160
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).
---------------------------------------------------------------------------------------------------------------------------------------

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STANDARD COSTING WITH SOLUTIONS

Question 1: Calculate Material Price Variance and Material Usage Variance:

Actual (Output 2,10,000 kg)

Material Price Variance

Material Cost Variance

Consumption per 100 Units of Product

Data for Material Variances

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

Calculate the following Variances:

Actual price per kg.

I. The cost variance in total:

Data for Material Variance

Material Usage Variance

Material Mix Variance

Material Yield Variance

Material Cost Variance

Data for material variance

Material Usage Variance

= 1,130 + 1,275 = 2,405

2. Calculation of Actual Quantity Consumed

() Closing stock at works

Material Price Variance:

A: (3,01,000 3,00,500) 1 = 500(F)

2. Standard price per kilogram of Chemical A ` 12 and Chemical B ` 15.

Data for Material Variance

100 for 90G

= (55 40) 12 + (55 70) 15

= (50 40) 12 + (50 70) 15

3. Material Price Variance= (S.R. A.R.) A.Q.

= (110 90) = ` 20/kg

5. Actual Input of Chemical A = 110 70 = ` 40/kg

-135 = (100 T.A.Q) X 1,350/100 13,500

The following information is provided.

Data for Labour Variances

Actual (4100 units)

1. Labour rate variances

(S.R. A.R.) Actual payment hours

2. Calculation of Revised Budgeted Hrs.

4,000 F.G. = 90,000 Labour Hrs.

90,000 LAbour Hrs.

60,000 LAbour Hrs.

Data for Labour Variance

Revised Budgeted (960)

Amount Lab Hr.

Statement of Labour Variance

2. Labour Rate Variance

3. Labour Efficiency Variance

(Standard Hrs. Actual Working Hours) S.R.

4. Labour Idle Time Variance

(Idle Time S.R.)

Data for Labour Variance

Standard Ratio for

Actual Mix (weeks)

Statement of Labour Variances

Standard Cost Actual Cost

(S.R. A.R.) Actual Payment Hrs

(S.Q. A.Q.) S.R

--------------------------------------------------------------------------------------------------------------------------------------Question 18: The following data is given: