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### Standard qty at std mix
### Actual qty at actual mix
### Actual qty at std mix
Material Price Variance:
Material Rate Difference Std Actual
Gum Base 0.25 0.24 0.01 Fav
Corn Syrup 0.40 0.42 0.02 UF
Sugar 0.10 0.11 0.01 UF
Material Mix Variance:
MMV = (Difference b/w Actual qty at actual mix and actual qty at std mix) x std rate
Material Actual Qty Std. Mixing Actual Qty Variance at actual mix Ratio at Std. Mix
Gum Base 157,000 0.6667 154,000 3,000
Corn Syrup 38,000 0.1667 38,500 500
Sugar 36,000 0.1667 38,500 2,500 231,000 1 231,000
Working no.1: Calculation of Standard Mixing Ratio:
Material Qty Std. Mix
Gum Base 800 0.6667
Corn Syrup 200 0.1667
Sugar 200 0.1667
1,200 1
Working no.2: Calculation of actual quantity at actual mix:
Material Opening Purchase Closing Actual Qty Stock Stock used
Gum Base 10,000 162,000 15,000 157,000
Corn Syrup 12,000 30,000 4,000 38,000
Sugar 15,000 32,000 11,000 36,000 Actual Quantity used at 231,000 Actual mixing ratio
Material Yeild Variance:
Actual material input 231,000 Expected yeild 0.8333
Output ?
Expected yeild = Output / input 0.8333 = Output / 231,000
Output = 192,500 Std, Output 200,000 Actual output
7,500 Yeild - Fav 0.30 Std. Material output rate
2,250 Material yeild variance (Fav)
Actual MPV Qty
162,000 ### Fav
30,000 ### UF
32,000 ### UF MPV ### Fav
MMV = (Difference b/w Actual qty at actual mix and actual qty at std mix) x std rate
Std. Material Rate Mix Variance
UF 0.25 750 UF
Fav 0.40 200 Fav
Fav 0.10 250 Fav 300 UF
Actual Qty
Fatory over head Variance2 - Variance method
1 Controllable Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH 100,000
b) Budget allowance based in standard hours allowedFixed budgeted overheadVariable budgeted OH(Standard hours allowed xVariable per unit rate) - 120,000
CONTROLLABLE VARIANCE 20,000
2 Volume Variancea) Budget allowance based in standard hours allowed 120,000
b) Overhead charged to productionStandard hours allowed xTotal Standard Factory overhead rate 150,000
VOLUME VARIANCE 30,000
3 - Variance method
1 Spending Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH -
b) Budget allowance based in actual hours Fixed budgeted overheadVariable budgeted OH(Actual hours xVariable per unit rate) - -
Spending Variance -
2 Idle Capacity Variancea) Budget allowance based in Actual hours -
b) Overhead charged to productionActual hours xTotal Standard Factory overhead rate -
Idle Capacity Variance -
3 Efficiency Variancea) Overhead charged to production (Based on Actual hours)Actual hours allowed xTotal Standard Factory overhead rate -
b) Overhead charged to production (Based on Standard hours)
Standard hours allowed xTotal Standard Factory overhead rate -
Efficiency Variance
Sol of Ex - 1
Material Quantity Variance
Formula: Difference between Standard and Actual Quantity x Standard Rate
Standard quantity allowed for production(7,200 Chairs x 12 m per chair) 86,400 meters
Actual quantity used in production 87,300 meters
Difference (900) U Standard Rate 0.80
Material quantity variance (720) U
Material Price Variance
Formula: Difference between Standard and Actual rate x Actual quantity purchased
Standard rate for purchases 0.80 Actual rate on purchases 0.78
Difference 0.02 F Actual Quantity purchased 100,000
Material price variance 2,000 F
Difference between Standard and Actual Quantity x Standard Rate
Difference between Standard and Actual rate x Actual quantity purchased
Solution of Ex-2
Material Price Variance (At the time of purchases)
Difference between Standard and Actual rate x Actual quantity purchased
Standard rate for purchases 3.65 Actual rate on purchases 3.60
Difference 0.05 F Actual Quantity purchase 2,000
Material price variance 100 F
Material Price Variance (at the time of issue)
Difference between Standard and Actual rate x Actual quantity ISSUE
Standard rate for purchases 3.65 Actual rate on purchases 3.60
Difference 0.05 F Actual Quantity issued 1,775
Material price variance 89 F
Difference between Standard and Actual rate x Actual quantity purchased
Difference between Standard and Actual rate x Actual quantity ISSUE
Solution of Ex -3
Labour hour/ efficency Variance
Difference between Standard and Actual hours x Standard Rate
Standard hours allowed for production(2,000 units x 0.80 hours) 1,600 Actual hours used in production 1,580
Difference 20 F Standard Rate 6.75
Labour hour/ efficency Variance 135 F
Labour Price Variance
Difference between Standard and Actual rate x Actual hours used
Standard rate for payment of labour 6.75 Actual rate paid to labour 6.90
Difference (0.15) u Actual hours used 1,580
Labour Price Variance (237) u
Difference between Standard and Actual hours x Standard Rate
Difference between Standard and Actual rate x Actual hours used
Solution of Ex -4
Fatory over head Variance2 - Variance method
1 Controllable Variancea) Actual amount of factory overhead
1 Fixed FOH 4,500 2 Variable FOH 6,500
b) Budgeted Factory overhead:1 Fixed budgeted overhead 4,500 2 Variable budgeted OH
(Standard hours allowed x 4,500 Variable per unit rate) 1.50 6,750
CONTROLLABLE VARIANCE
2 Volume Variancea) Budgeted Factory overhead:
1 Fixed FOH 4,500 2 Variable FOH 6,750
b) Standard Fac tory overhead1 Fixed FOH (4,500 hours x 0.90) 4,050 2 Variable FOH (4,500 hours x 1.50) 6,750
VOLUME VARIANCE
3 - Variance method
1 Spending Variance
a) Actual amount of factory overhead1 Fixed FOH2 Variable FOH
b) Budgeted Factory overhead1 Fixed budgeted overhead 4,500 2 Variable budgeted OH
(Actual hours worked x 4,400 Variable per unit rate) 1.50 6,600
Spending Variance
2 Idle Capacity Variancea) Budget allowance based in Actual hours allowed
b) Overhead charged to production (Based on Actual hours)Actual hours allowed x 4,400 Total Standard Factory overhead rate 2.40
Idle Capacity Variance
3 Efficiency Variancea) Overhead charged to production (Based on Actual hours)Actual hours allowed xTotal Standard Factory overhead rate
b) Overhead charged to production (Based on Standard hours)Standard hours allowed xTotal Standard Factory overhead rate
Efficiency Variance
4 - Variance method
1 Spending Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH
b) Budget allowance based on actual hours Fixed budgeted overheadVariable budgeted OH(Actual hours x 4,400 Variable per unit rate) 1.50
Spending Variance
2 Variable Efficiency Variance:
Budget allowance based on actual hours
Budget allowance based on Standard hours allowed
Variable Efficiency Variance:
Proof ORDifference between actual hours and Standard hours x variable FOH rate
(4500 hours std. - 4400 hours actual) x 1.50
(100 hours Fav x 1.50)
Rs. 150 Fav.
3 Fixed Efficiency Variance:
Actual hours x Fixed FOH rate (4,400 hours x 0.90)
Standard hours allowed x Fixed FOH rate (4,500 hours x 0.90)
Fixed Efficiency Variance:
Proof ORDifference between actual hours and Standard hours x Fixed FOH rate
(4500 hours std. - 4400 hours actual) x 0.90
(100 hours Fav x 0.90)
Rs. 90 Fav.
4 Idle Capacity Variance
Normal Capacity hours x Fixed FOH rate (5,000 hours x 0.90)
Actual hours worked x Fixed FOH rate (4,400 hours x 0.90)
Idle Capacity Variance
Proof ORDifference between actual hours and Normal capacity hours x Fixed FOH rate
(5000 hours std. - 4400 hours actual) x 0.90
(600 hours Unfav x 0.90)
Rs. 540 Unfav.
Fatory over head Variance
11,000
11,250 (250) F
11,250
10,800
(450) U
4,500 6,500 11,000
11,100 (100) F
11,100
10,560 (540) U
10,560
b) Overhead charged to production (Based on Standard hours) 4,500 2.40 10,800
(240) F
11,000
4,500
6,600 11,100 100 Fav
11,100
-
(11,100) Fav
Difference between actual hours and Standard hours x variable FOH rate
(4,400 hours x 0.90) 3,960
(4,500 hours x 0.90) 4,050
90 Fav
Difference between actual hours and Standard hours x Fixed FOH rate
4,500
3,960
540 Unfav
Difference between actual hours and Normal capacity hours x Fixed FOH rate
Quantity Schedule:
Units in process (at start) 80 units (all material, 50% conversion) Units put in to process 7,850 units
Total 7,930 units
Units completed & tansferred out 7,830 units Units in process (at end) 100 units (all material, 50% conversion)
7,930 units
Equivalent Production Unit
Material Conversion Units completed & transferred out 7,830 7,830 Less: Opening stock (80) (80)
Unit started & completed 7,750 7,750 Add: Opening stock - work this period - 40 Add: Closing stock - work this period 100 50
EPU 7,850 7,840
Material Quantity Variance
Formula:Difference between Standard and Actual Quantity x Standard Rate
Standard quantity allowed for production(7,850 units x 24 kgs per unit) 188,400
Actual quantity used in production 192,410
Difference 4,010 U Standard Rate 3
Material quantity variance 12,030 U
Material Price Variance
Formula:Difference between Standard and Actual rate x Actual quantity used
Standard rate for purchases 3 Actual rate on purchases 3.04
Difference 0.04 U Actual Quantity 192,410
Material price variance 7,696.40 U
Labour hour/ efficency Variance
Formula:Difference between Standard and Actual hours x Standard Rate
Standard hours allowed for production(7,840 units x 6 hours per unit consumption) 47,040
Actual hours used in production 46,830
Difference 210 F Standard Rate 6.50
Labour hour/ efficency Variance 1,365 F
Labour Price Variance
Formula:Difference between Standard and Actual rate x Actual hours used
Standard rate for payment of labour 6.50 Actual rate paid to labour 6.60
Difference 0.10 U Actual hours used 46,830
Labour Price Variance 4,683 U
Fatory over head Variance2 - Variance method
1 Controllable Variance
a) Actual amount of factory overheadFixed FOH 11,250 Variable FOH 25,090
b) Budget allowance based in standard hours allowedFixed budgeted overhead 11,250 Variable budgeted OH(Standard hours allowed x 47,040 Variable per unit rate) 0.50 23,520
CONTROLLABLE VARIANCE
Note: Standard hours allowed = 7,840 units x 6 =47,040 hours Standard rate = Rs. 22,500 / 45,000 hours = 0.50
2 Volume Variancea) Budget allowance based in standard hours allowed
b) Overhead charged to productionStandard hours allowed x 47,040 Total Standard Factory overhead rate 0.75
VOLUME VARIANCE
Note: Total FOH rate = Rs. 33,750 / 45,000 hours = 0.75
units (all material, 50% conversion)
units (all material, 50% conversion)
Difference between Standard and Actual rate x Actual quantity used
Fatory over head Variance
36,340
34,770 1,570 U
34,770
35,280 510 F
Required no.1: Standard quantity allowed of material:
Actual production 4,000 units Per unit standard consumption of material 6 lbs
Standard quantity allowed 24,000 lbs
Required no.2: Actual quantity used of material:
Standard quantity allowed 24,000 lbs add: unfavourable quantity variance 1,000 lbs
Actual quantity used 25,000 lbs
Required no. 3: Standard hours allowed:
Actual production 4,000 units Per unit standard consumption of labour 1 hour
Standard hours allowed 4,000 hours
Required no. 4: Actual hours worked:
Standard hours allowed 4,000 hours Less: Favourable labour efficiency variance (200) hours
Actual hours allowed 3,800 hours
Note: Favourable hours = Rs. 800 efficiency variance / Rs. 4 per hour = 200 hours
Required no. 5: Actual direct labour rate:
Standard direct labor rate 4 Add: unfavourable labor rate variance 0.20
Actual direct labour rate 4.20
Note: Unfavourable rate = Rs. 760 labor rate variance / 3,800 actual hours worked
= 0.20
Required no. 6: Actual Factory overhead
Standard factory overhead (4,000 units actual production x Rs. 3 per unit FOH rate)
Add: unfavourable FOH variance
Actual Factory overhead
Note: Unfavourable rate = Rs. 760 labor rate variance / 3,800 actual hours worked
12,000
500
12,500
Aplha Beeta
Actual Sales 120 million @ Rs. 1.10 40 million @ Rs. 2.20 Actual COGS 120 million @ Rs. 0.90 40 million @ Rs. 1.80
Budgeted Sales 110 million @ Rs. 1.35 70 million @ Rs. 2.70 Budgeted COGS 110 million @ Rs. 1.10 70 million @ Rs. 2.20
Required (1): Calculate a) Sales Price variance b) Sales volume variance c) Cost price variance d) Cost volume variance
Required (2) Sales mix and the final sales volume variance
Solution Sales Price Variance: (Actual quantity x Actual mix x Actual rate) - (Actual quantity x Actual mix x Std. rate)
[(Actual qty x actual rate) + (actual qty x actual rate)] - [(Actual qty x std rate) + (actual qty x std rate)]
[(6,000 x 10) + (2,000 x 20)] - [(6,000 x 12.5) + (2,000 x 25)]
Rs. 25,000 (Un-Favourable)
Sales Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]
[(6,000 x 12.5) + (2,000 x 25)] - [(5,000 x 12.5) + (3,500 x 25)]
Rs. 25,000 (Un-Favourable)
Req no. 3: Cost Price variance
[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
Cost Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x std COGS rate) + (Budgeted qty x std COGS rate)]
SALES MIX VARIANCE
Actual quantity x actual mix x standard rate
Less: Actual quantity x actual mix x standard COGS rat
Less: Actual sales (both) x budgeted average gross profit (6,000 + 2000) x 3.5294
SALES MIX VARIANCE
Total
Rs. 220 million Rs. 180 million
Rs. 337.50 million Rs. 275.00 million
(Actual quantity x Actual mix x 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 rate)]
[(6,000 x 10) + (2,000 x 20)] - [(6,000 x 12.5) + (2,000 x 25)]
(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]
[(6,000 x 12.5) + (2,000 x 25)] - [(5,000 x 12.5) + (3,500 x 25)]
[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x std COGS rate) + (Budgeted qty x std COGS rate)]
125,000
(100,000)
25,000 Less: Actual sales (both) x budgeted average gross profit
(28,235.20)
(3,235.20) 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 rate)]
[(120 m x 1.10) + (40 m x 2.20)] - [(120 m x 1.35) + (40 m x 2.70)]
Rs. 220 - Rs. 270
Rs. 50 million (unfavourable)
Sales Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]
[(120 m x 1.35) + (40 m x 2.70)] - [(110 m x 1.35) + (70 m x 2.70)]
[162 + 108] - [ 148.50 + 189]
270 - 337.50
67.50 (Unfavourable)
Req no. 3: Cost Price variance
[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
[(120 m x 0.90) + (40 m x 1.80)] - [(120 m x 1.10) + (40 m x 2.20)]
[108 + 72] - [ 132 + 88]
180 - 220
40 Million (Favourable)
Cost Volume variance: (Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x std COGS rate) + (Budgeted qty x std COGS rate)]
[(120 m x 1.10) + (40 m x 2.20)] - [(110 m x 1.10) + (70 m x 2.20)]
[ 132 + 88] - [ 121 + 154]
220 - 275
Rs. 55 (Favourable)
SALES MIX VARIANCE
Actual quantity x actual mix x standard rate 270
Less: Actual quantity x actual mix x standard COGS rate (220)
50 Less: Actual sales (both) x budgeted average gross profit (120 m + 40 m) x 0.347 (55.52)
SALES MIX VARIANCE (5.52)
FINAL SALES VOLUME VARIANCE
Budget sales 337.50 Less: Budgeted COGS (275.00) Budgeted Gross Profit 62.50 Less: Actual sales (both) x budgeted average gross profit (120 m + 40 m) x 0.347 (55.52)
6.98
(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 rate)]
(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]
[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)
[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x std COGS rate) + (Budgeted qty x std COGS rate)]
unfavourable
unfavourable
Required no. 1: Schedule of allocation of variance:
Variances Total WIP
Material Price variance W-1 12,000 4,500 Labour efficiency variance W-2 6,000 1,200 FOH Controllable W-3 7,200 2,880 FOH Volume W-3 12,000 4,800
37,200 13,380
W-1 Material Price variance allocation
Material Variance Inventory
WIP 60,000 4,500 FG 20,000 1,500 COGS 80,000 6,000
160,000 12,000
W-2 Labour Efficiency variance allocation
Labour Variance Cost
WIP 20,000 1,200 FG 20,000 1,200 COGS 60,000 3,600
100,000 6,000
W-3 FOH Controllable & Volume variance allocation
FOH Controllable Volume Cost Variance Variance
WIP 80,000 2,880 4,800 FG 20,000 720 1,200 COGS 100,000 3,600 6,000
200,000 7,200 12,000
Required no.2: COMPARATIVE COGS
Stardard Variance Actual
Material purchased 200,000 12,000 212,000 Less: Ending R/Material (40,000) - (40,000) Raw material used 160,000 172,000
Direct labor 100,000 6,000 106,000
Prime Cost 260,000 278,000
Factory overhead 200,000 19,200 219,200
Manufacturing cost 460,000 497,200 Less: WIP (at end) (160,000) 13,380 (173,380)
Cost of Goods manufactured 300,000 323,820
Less: Finished goods (at end) (60,000) 4,620 (64,620)
Cost of Goods Sold 240,000 259,200
Required no. 3: Income Statement (Actual Basis)
Sales 520,000 Less: Cost of goods sold (259,200)
Gross Profit (actual) 260,800
Less: Operating Expenses: Administrative Expenses 120,000 Marketing Expenses 60,000 (180,000)
NET INCOME (Actual) 80,800
Required no. 4: Reconcilation of Standard and Actual Income:
NET INCOME (Actual) 80,800
Add: Variance allocated to COGS 19,200
Standard Income 100,000
FG COGS
1,500 6,000 1,200 3,600 720 3,600 1,200 6,000 4,620 19,200
Requried no.1: Material Price, Mix and Yeild variance:
Material Price variance:
Material Actual Price Standard Price Variance
A 2,200 2,150 50
B 1,850 1,750 100
C 1,200 1,250 50
Material Mix Variance
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
Mate Actual Standard Actual Qty Quantity used Mix % at Std. mix
A 1,870 50 1,705
B 1,100 40 1,364
C 440 10 341 3,410 100 3,410
Material Yeild Variance
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard price
Mat Actual Qty Standard Std. Qty at at Std. mix Mix % Std. Mix
A 1,705 50 1,778.70
B 1,364 40 1,422.96
C 341 10 355.74 3,410 100 3,557.40
Actual production x Input ratio 3,234 tons x 110%
3,557.40
Labour hour/ efficency Variance
FormDifference between Standard and Actual hours x Standard Rate
Std. hours allowed for actual input (500 hours/ 110 input x 3,410 act. input)Actual hours used for actual input
Difference Standard Rate
Labour hour/ efficency Variance
Labour Rate Variance
FormDifference between Standard and Actual rate x Actual hours used
Standard rate for payment of labourActual rate paid to labour
Difference Actual hours used
Labour Price Variance
Labour Yield Variance
Std. hours allowed for actual input (std. hours for actual input) (3,410 tons x 500 hours / 110 tons)
Std. hours allowed for actual Output (std. hours for actual Output) (3,234 tons x 500 hours /100 tons)
Difference
Std. rate of direct laborLabour Yield Variance
1 Spending Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH
b) Budget allowance based in actual hours Fixed budgeted overheadVariable budgeted OH(Actual hours xVariable per unit rate)
Standard Variable rate Rs. 412,500 / 16,500 hours = Rs. 25
2 Idle Capacity Variancea) Budget allowance based in Actual hours
b) Overhead charged to productionActual hours xTotal Standard Factory overhead rate
Standard Total FOH rate = (618,750 + 412,500) / 16,500 hours = Rs. 62.50
3 Efficiency Variancea) Overhead charged to production (Based on Actual hours)Actual hours allowed xTotal Standard Factory overhead rate
b) Overhead charged to production (Based on Standard hours)Standard hours allowed for actual input xTotal Standard Factory overhead rate
4 Factory overhead Yeild variance
Std. hours allowed for actual input (std. hours for actual input x Total std. FOH rate) (3,410 tons x 500 hours / 110 tons x Rs 62.5)
Std. hours allowed for actual Output (std. hours for actual Output x Total std. FOH rate) (3,234 tons x 500 hours /100 tons x Rs. 62.5)
Actual QTY Material Price
Purchases Variance
Unfav. 2,000 100,000 Unfav.
Unfav. 1,200 120,000 Unfav.
Fav 500 25,000 Fav
Material Price variance 195,000 Unfav.
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
Variance Standard price Material Mix Variance
165 unfav 2,150 ### unfav
264 fav 1,750 ### fav
99 unfav 1,250 ### unfav MATERIAL MIX VARIANCE 16,500 unfav
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard price
Variance Standard pric Material yeild variance
73.70 Fav 2,150 ### Fav
58.96 Fav 1,750 ### Fav
14.74 Fav 1,250 18,425 Fav MATERIAL yeild VARIANCE ### Fav
Difference between Standard and Actual hours x Standard Rate
Std. hours allowed for actual input (500 hours/ 110 input x 3,410 act. input) 15,500 15,800
300 unfav 37.50
11,250 unfav
Difference between Standard and Actual rate x Actual hours used
37.50 39.75
2.25 Unfav 15,800
35,550 Unfav
15,500
Std. hours allowed for actual Output (std. hours for actual Output) 16,170
670 Fav
Std. rate of direct labor 37.50 Labour Yield Variance 25,125 Fav
553,750 424,500 978,250
618,750
15,800 x Rs 25 395,000 1,013,750 Spending Variance 35,500 Fav
Rs. 412,500 / 16,500 hours = Rs. 25
1,013,750
15,800 x Rs 62.50 987,500 Idle Capacity Variance 26,250 Unfav
Standard Total FOH rate = (618,750 + 412,500) / 16,500 hours = Rs. 62.50
a) Overhead charged to production (Based on Actual hours) 987,500
b) Overhead charged to production (Based on Standard hours) 15,500 x Rs 62.50 968,750 -
Efficiency Variance 18,750 Unfav
Std. hours allowed for actual input (std. hours for actual input x Total std. FOH rate) 968,750 (3,410 tons x 500 hours / 110 tons x Rs 62.5)
Std. hours allowed for actual Output (std. hours for actual Output x Total std. FOH rate) (3,234 tons x 500 hours /100 tons x Rs. 62.5) 1,010,625
41,875 Fav
W-1: Actual cost of material
Items Actual Actual Actual Qty used Rate Cost
Alpha 109,200 7.25 791,700
Beta 149,500 3.25 485,875
Gamma 27,300 13.50 368,550 286,000 1,646,125
W-2: Actual matererial used at Standard rate:
Items Actual Standard Standard Qty used Rate Cost
Alpha 109,200 6.50 709,800
Beta 149,500 4.00 598,000
Gamma 27,300 13.00 354,900 286,000 1,662,700
W-3: Actual material at Standard mix and Standard rate:
Items Actual Standard Mix Actual Qty Standard Qty used at std. mix Rate
Alpha 109,200 5,200 / 13,000 = .40 114,400 6.50
Beta 149,500 6,500 / 13,000 = .50 143,000 4.00
Gamma 27,300 1,300 / 13000 = .10 28,600 13.00 286,000 286,000
W- 4: Standard material for actual production:
Actual Production 253,300
` Standard material for actual production Input ratio 100 Output ratio 90
Actual production is 253,300 kgs which is 90% of Input Therefore Input kgs are 253,300 / 90% 281,444 kgs
Proof: Input 281,444 Less: 10% wastage (28,144) Actual Production (output) 253,300
W-5: Standard material at Standard Mix and rate
Items Standard Standard Material Standard Amount Ratio at Standard Mix Rate
Alpha 40% 112,578 6.50 731,756
Beta 50% 140,722 4.00 562,889
Gamma 10% 28,144 13.00 365,878 281,444 1,660,522
Required1: Direct Material Total Variance
Direct material total variance = Difference between Standard and Actual Cost of material
Actual Cost of Direct material (W-1) 1,646,125
Standard Cost of Direct material (W-5) 1,660,522 Direct Material Total Variance 14,397 Fav
Required 2: Direct Material Price Variance
Material Actual Price Standard Price Variance Actual QTY
Purchases
Alpha 7.25 6.50 0.75 Unfav. 109,200
Beta 3.25 4.00 0.75 Fav 149,500
Gamma 13.50 13.00 0.50 Unfav. 27,300
Material Price variance
Required no 4: Direct Material Mix variance
Material Mix Variance
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
Material Actual Standard Actual Qty Variance Quantity us Mix % at Std. mix
Alpha 109,200 40 114,400 5,200 Fav
Beta 149,500 50 143,000 6,500 Unfav
Gamma 27,300 10 28,600 1,300 Fav 286,000 100 286,000 MATERIAL MIX VARIANCE
Amount
743,600
572,000
371,800 1,687,400
Direct material total variance = Difference between Standard and Actual Cost of material
Material Price
Variance
81,900 Unfav.
112,125 Fav
13,650 Unfav.
16,575 Fav
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price
Standard Material Mix Rate Variance
6.50 33,800 Fav
4.00 26,000 Unfav
13.00 16,900 Fav MATERIAL MIX VARIANCE 24,700 Fav
Comparative Income Statement Analyzing the Budgeted and Actual Operating Income
Sales (118,000 units x Rs 25)
Less: Cost of Goods sold Cost of Goods manufactured (110,000 units x 17.60) 1,936,000
Add: Finished goods (at start) (20,000 units x 17.60) 352,000 TOTAL FINISHED GOODS AVAILABLE 2,288,000
Less: Finished goods (at end) (12,000 units x 17.60) (211,200)
COST OF GOODS SOLD (STD.) 2,076,800
Add: Unfavourable variance Material quantity variance (W-4) 24,000 Labour price variance (W-7) 25,760
FOH Controllable variance (W-8) 16,500 66,260 66,260
Less: Favourable variance Material Price Variance (W-5) 3,750 Labour hour variance (W-6) 32,000
FOH Volume variance (W-9) 7,000
42,750 (42,750) COST OF GOODS SOLD (Actual)
GROSS PROFIT (ACTUAL) Less: Operating Expenses
Administrative and marketing expenses
NET INCOME (ACTUAL)
W-1: Calculation of numbers of units sold:
Units Finished goods (at start) 20,000
Add: Production during the period 110,000 Total FG available for sales 130,000
Less: Finished goods (at end) (12,000)
UNITS SOLD 118,000
W-2: Per unit cost of Product:
Direct material per unit (2 units x 1.50) 3.00
Direct Labor per unit (1.50 hours x 8) 12.00 Variable FOH per unit 1.50 Fixed FOH per unit 1.10
Per unit cost of Product 17.60
W-3: Equivalent Production Unit
Material Unit in process (at start) 10,000
Add: Units put into production 240,000 Total Work in process 250,000
Less: Unit in process (at end) (15,000) Units completed 235,000
Less: Unit in process (at start) - all units (10,000) 225,000
Add: Units in process (at start) - 3/5 completed 6,000 231,000
Add: Units in process (at end) - 1/3 completed 5,000
Actual Material used 236,000
W-4 Material Quantity Variance
Formula: Difference between Standard and Actual Quantity x Standard Rate
Standard quantity allowed for production(110,000 units x 2 lbs per unit) 220,000
Actual quantity used in production 236,000
Difference 16,000 Standard Rate 1.50
Material quantity variance 24,000
W-5 Material Price Variance
Formula: Difference between Standard and Actual rate x Actual quantity purchased
Standard rate for purchases 1.500 Actual rate on purchases 1.485
Difference 0.015 Fav Actual Quantity 250,000
Material price variance 3,750 Fav
W-6 Labour hour/ efficency Variance
Standard hours allowed for production(110,000 units x 1.5 hours per unit) 165,000
Actual hours used in production 161,000 (1,313,760 / 8.16)
Difference 4,000 Fav Standard Rate 8
Labour hour/ efficency Variance 32,000 Fav
W-7 Labour Price Variance
Standard rate for payment of labour 8.00 Actual rate paid to labour 8.16
Difference 0.16 UnFav Actual hours used 161,000
Labour Price Variance 25,760 UnFav
Fatory over head Variance2 - Variance method
W-8 1 Controllable Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH
b) Budget allowance based in standard hours allowedFixed budgeted overhead
Variable budgeted OH(Standard hours allowed x 110,000
Variable per unit rate) 1.50
CONTROLLABLE VARIANCE
W-9 2 Volume Variancea) Budget allowance based in standard hours allowed
b) Overhead charged to productionStandard hours allowed x 110,000
Total Standard Factory overhead rate 2.60
VOLUME VARIANCE
2,950,000
(2,100,310)
849,690
(651,000) 198,690
Unfav per lbs
Unfav
(1,313,760 / 8.16)
Fatory over head Variance
114,000
181,500 295,500
114,000
165,000 279,000
16,500 Unfav
279,000
286,000
7,000 Fav