Standard Costing Examples

### 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 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


Difference 0.05 F Actual Quantity issued 1,775

Material price variance 89 F


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

Solution of Ex -4


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


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


(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


(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


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


Formula:Difference between Standard and Actual rate x Actual hours used


Difference 0.10 U Actual hours used 46,830

Labour Price Variance 4,683 U


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


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

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)


[(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)


[(6,000 x 12.5) + (2,000 x 25)] - [(5,000 x 12.5) + (3,500 x 25)]




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)


[(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)


[(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


[(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)


[(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)







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


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 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 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



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.


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


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


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


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


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


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


Difference 0.16 UnFav Actual hours used 161,000

Labour Price Variance 25,760 UnFav


W-8 1 Controllable Variancea) Actual amount of factory overhead


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


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)


114,000

181,500 295,500

114,000

165,000 279,000

16,500 Unfav

279,000

286,000

7,000 Fav

Standard Costing Examples

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Transcript of Standard Costing Examples