Direct Material 50% to 55% = Sugar Industry 65 70% = need to monitor and control Std. Quantity = Production Dept.

. = Normal or inevita le losses Standard Price = Purc!ase Dept. "ecent# past and li$ely trends stoc$# orders and li$ely price %luctuations Direct Labour Std. Time = &ime ' (otion Study st ) (otion Study identi%y unnecessary motion and eliminate t!em ' t!en time allotted Normal idle time to cover mental and p!ysical %atigue Std. Wage Rate = "ates in t!e mar$et. Degree o% s$ill re*uired +vaila ility ,age Structure Concept of Standard Hour i! e"tremely important in !etting t#e !tandard! for labour. $t i! a #ypot#etical #our% &#ic# repre!ent! t#e amount of &or'% &#ic# !#ould be performed in one #our under !tandard condition!. (actory )*er#ead! Standard Capacity Normal capacity N-& Installed capacity. It is practical capacity ased on resources availa le ' e%%icient utili.ation o% same Std. )+H Co!t &!e Std. -/! are %i0ed 12 = constant/ unit Necessary to calculate Std 1 o/! per unit/per !our In case 3 o/! udged 3 o/! and udgeted production Direct ,"pen!e! I% Std. e0penses are t!ere = determine t!e rate per unit ased on udgeted output and udgeted direct e0penses

Material Co!t -ariance. Std 2ost o% (aterial 2onsumed %or +ctual Production +ctual 2ost I% t!e actual cost o% material consumed is less t!an t!e standard cost o% material consumed# t!e variance is 4%avoura le5# ot!er6ise it is adverse. Material Price -ariance. +ctual 7uantity 8Std Price +ctual Price9 Material Quantity /0!age1 -ariance. Std Price 8Std 7uantity +ctual 7uantity9 Illustration No.)9 2alculate (aterial 1ariances %rom t!e %ollo6ing details. Standard *uantity o% materials %or producing ) unit o% :nis!ed product 4P5 is 5 $g. &!e standard price is "s.6 per $g. During a particular period# 500 units o% 4P5 6ere produced. +ctual material consumed 6as ;700 $g at a cost o% "s.)6# ;00. I9 (aterial 2ost 1ariance = Standard 2ost o% (aterials +ctual 2ost 500 units 0 5 $g 0 "s.6 "s.)6# ;00 "s.)5# 000 "s.)6# ;00 = "s.)# ;00 8+9 II9 (aterial Price 1ariance = +ctual 7uantity 8Std Price +ctual Price9 ;# 700 8"s.6 "s.69 = Nil III9 (aterial 7uantity 1ariance = Standard Price 8Std. 7ty +ctual 7ty9 "s.6 8;500 ;7009 = "s.)# ;00 8+9 Reconciliation (aterial 2ost 1ariance = (aterial Price 1ariance < (aterial 7uantity 1ariance. "s.);00 8+9 = "s. Nil < "s.)# ;00 8+9 Material Mi" -ariance = Std 2ost o% Std (i0 Std 2ost o% +ctual (i0 Material 2ield -ariance . e.g. Input is )00# output may e =5# 5 units eing normal or unavoida le loss. Material 2ield -ariance = S>" 8+ctual >ield Standard >ield9 S>" = Std >ield "ate# i.e. standard cost per unit o% standard output. Quantity -ariance = (i0 1ariance < >ield 1ariance. (aterial cost variance = Price 1ariance < 7uantity variance 7uantity variance = (i0 variance < >ield variance

3. Labour Co!t -ariance. Std 2ost o% ?a our 2ost %or +ctual Production +ctual 2ost I% t!e actual cost o% la our is less t!an t!e standard cost o% la our# t!e variance is 4%avoura le5# ot!er6ise it is adverse. 4. Labour Rate -ariance. +ctual @ours Paid 8Std "ate +ctual "ate9 5. Labour ,fficiency -ariance or 6ang Compo!ition -ariance. Std "ate 8Std @ours %or actual output +ctual @ours 6or$ed9 Std "ate 8Std &ime +ctual &ime9 7. Labour Mi" -ariance
(ay consist o% s$illed# semi s$illed and uns$illed 6or$ers

?a our (i0 1ariance = Std 2ost o% Std (i0 Std 2ost o% +ctual (i0 8. Labour 2ield -ariance . indicates t!e di%%erence et6een t!e actual output and t!e standard output ased on actual !ours. Labour 2ield -ariance ?>1 = +verage Std ,age "ate Per Anit 8+ctual -utput Std -utput9 $dle Time -ariance. &!is variance indicates t!e loss caused due to a normal idle time. I&1 = + normal Idle &ime B Standard "ate. o ?a our 2ost 1ariance "ate 1ariance C%%iciency 1ariance (i0 1ariance >ield 1ariance Idle &ime 1ariance

3. (i"ed )+# Co!t -ariance. Std 3i0ed -/! %or +ctual Production +ctual 3i0ed -/! I% t!e actual cost o% 3i0ed -/! is less t!an t!e standard cost o% 3i0ed -/!# t!e variance is 4%avoura le5# ot!er6ise it is adverse. 4. (i"ed )+# ,"penditure + 9udget -ariance. : Dudgeted 3i0ed -/!s +ctual 3i0ed -/!s 5. (i"ed )+# -olume -ariance. Std "ate 8Dudgeted 7uantity +ctual 7uantity9 : (i"ed )+# Co!t -ariance : ,"p.-ariance ; -olume -ariance 7. (i"ed )+# ,fficiency -ariance
-utput actually ac!ieved and t!e output 6!ic! s!ould !ave een ac!ieved in t!e actual !ours 6or$ed.

= Std "ate 8Std Production +ctual Production9 8. (i"ed )+# Capacity -ariance . arises due to t!e di%%erence et6een t!e capacity utili.ation# i.e. t!e capacity actually utili.ed and t!e udgeted capacity. 3-21 = Std "ate 8Std 7uantity E +ctual 7uantity9 : -olume -ariance : ,f<ciency -ariance ; Capacity -ariance =. (i"ed )*er#ead Re*i!ed Capacity -ariance. &!is variance indicates t!e di%%erence in capacity utili.ation due to 6or$ing %or more or less num er o% days t!an t!e udgeted one. &!e computation o% t!is variance is done y using t!e %ollo6ing %ormula. = Standard "ate 8Standard 7uantity "evised Dudgeted 7uantity9 >. (i"ed )*er#ead! Calendar -ariance. &!is variance indicates t!e di%%erence et6een t!e udgeted *uantity o% production and actual *uantity o% production ac!ieved arising due to t!e di%%erence in t!e num er o% days 6or$ed and udgeted. &!e %ormula %or computation o% t!is variance is as %ollo6s. = Std. "ate 8Dudgeted 7uantity "evised Dudgeted 7uantity9