Standard Costing

Material Quantity Variance
Formu
Difference between Standard and Actual Quantity x Standard Rate
1 Standard quantity allowed for production

(per unit consumption x actual units)
2 Actual quantity used in production
Difference -
Standard Rate
Material quantity variance -
Material Price Variance
Formu
Difference between Standard and Actual rate x Actual quantity purchased or issued
Standard rate for purchases
Actual rate on purchases
Difference -
Actual Quantity purchase / issue
Material price variance -
Labour hour/ efficency Variance
Formu
Difference between Standard and Actual hours x Standard Rate
Standard hours allowed for production

(per unit hour consumption x actual units)
Actual hours used in production
Difference
Standard Rate
Labour hour/ efficency Variance -
Labour Wage Variance
Formu
Difference between Standard and Actual rate x Actual hours used
Standard rate for payment of labour
Actual rate paid to labour
Difference
Actual hours used
Labour Price Variance

Fatory over head Variance
Important:
Controllable variance = Spending variance + Variable portion of efficiency variance
Volume variance = Idle capacity + Fixed portion of efficiency variance.
2 - Variance method
1 Controllable Variance
a) Actual factory overhead
I) Fixed FOH 20,000
II) Variable FOH 19,250 39,250
b) Budgeted Factory overhead

I) Fixed budgeted overhead 20,000
II) Variable budgeted OH

(Standard hours allowed x 11,000
Variable per unit rate) 1.50 16,500 36,500
CONTROLLABLE VARIANCE UF 2,750
2 Volume Variance
a) Budget FOH 36,500
b) Standand Factory Overhead

Standard hours allowed x 11,000
Total Standard Factory overhead rate 3.50 38,500
VOLUME VARIANCE Fav 2,000
OR
a) Budget FOH

b) Standand Factory Overhead

0.90 4,050
II) Variable budgeted OH 4,500

1.50 6,750 10,800
Uf 15,950
OR
VolumeVariance = 500 hours x 0.90 = 450 UF

VolumeVariance = Difference b/w STd. Hours and normal capacity x F.FOH rate
3 - Variance method
1 Spending Variance
a) Actual amount of factory overhead
I) Fixed FOH 20,000
II) Variable FOH 19,250 39,250
b) Budget FOH allowance based in actual hours

I) Fixed budgeted overhead
II) Variable budgeted OH 20,000
(Actual hours x 13,750
Spending Variance Fav 1,375
2 Idle Capacity Variance

a) Budget FOH based in Actual hours 40,625
b) Standard Overhead charged to production

Actual hours x 13,750
Idle Capacity Variance Fav 7,500
3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours allowed x 13,750
b) Overhead charged to production (Based on Standard hours)

Efficiency Variance UF 9,625
4 - Variance method
1 Spending Variance
I) Fixed FOH
II) Variable FOH -
b) Budget allowance based on actual hours

I) Fixed budgeted overhead
(Actual hours x
Variable per unit rate) - -
Spending Variance -
2 Variable Efficiency Variance:
Budget allowance based on actual hours -
Budget allowance based on Standard hours allowed -
Variable Efficiency Variance: -
3 Fixed Efficiency Variance:
Actual hours x Fixed FOH rate -
Standard hours allowed x Fixed FOH rate -
Fixed Efficiency Variance: -
Normal Capacity hours x Fixed FOH rate -
Actual hours worked x Fixed FOH rate -
Idle Capacity Variance -

Expected Yeild or Input ratio = Output / Input x 100
Material Price Variance - at different materials:
Calculate the material price variance for each material by same procedure.
Material A (Difference b/w std and actual rate) x actual qty purchase or used for Material A
Material B (Difference b/w std and actual rate) x actual qty purchase or used for Material B
Material C (Difference b/w std and actual rate) x actual qty purchase or used for Material C
MATERIAL PRICE VARIANCE
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 used Mix % at Std. mix
Gum Base 157,000 66.67 154,000 3,000 unfav
Corn Syrup 38,000 16.67 38,500 500 fav
Sugar 36,000 16.67 38,500 2,500 fav

231,000 100 231,000 MATERIAL MIX VARIAN
Expected Yeild = Output / Input
Expected Yeild = 1000 = 0.8333 Therefore;

1200 Normal loss = 1 - Expected yeild
or Normal loss = 1 - 0.8333
Output = Input x Expected yeild Normal loss = 0.1667
1200 x 0.8333
Abnormal loss - when loss is more 0.1667
Output = 1000 lbs
Abnormal gain - when loss is less than 0.1667
or
Input = Output / Expected yeild
1000 / 0.8333
Input = 1200 lbs
Material Yeild Variance

Material Yeild variance = (Diff. B/w Expected output as per expected yeild and actual output) x std average materia
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard price
Material Actual Qty Standard Std. Qty at Variance

at Std. mix Mix % Std. Mix
Gum Base 154,000 66.67 160,000 6,000 Fav
Corn Syrup 38,500 16.67 40,000 1,500 Fav
Sugar 38,500 16.67 40,000 1,500 Fav

231,000 100 240,000 MATERIAL yeild VARIAN
Actual production / Expected yeild

=200,000 lbs / 0.83333
Std. QTY 240,000
Material Quantity Variance:
Material mix variance 300 U

Material yeild variance 2250 Fav
MQV 1950 Fav
OR
Material Actual QTY Std. Qty Variance Std.

at actual mix at Std. mix rate
Gum Base 157,000 160,000 3,000 Fav 0.25

Corn Syrup 38,000 40,000 2,000 Fav 0.40
Sugar 36,000 40,000 4,000 Fav 0.10

231,000 240,000 MQV
Labour Efficiency Variance

Std. Hours allowed for Expected Output
(20 / 1000 units = 0.02 hours per units x 192,500 Expected Output)
Actual hours used

Difference
Std. Rate
Labor Efficiency Variance
Labour Rate Variance:
Standard rate
Actual rate (23,104 / 3,800 hours)
Difference
Actual hours
Labor Rate Variance
Labour Yeild Variance:
Standard hours allowed for Expected Output
(20 / 1000 units = 0.02 hours per units x 192,500 Expected Output)
Standard hours allowed for Actual output

(20 / 1000 units = 0.02 hours per units x 200,000 Actual Output)
Difference
Std. Rate
LYV (Difference b/w Expected output and actual output x per unit hour cons.) x Std. Rate
FACTORY OVERHEAD VARIANCE:
3 - Variance method
1 Spending Variance
Fixed FOH
Variable FOH
b) Budget allowance based in actual hours
Fixed budgeted overhead
Variable budgeted OH
(Actual hours x 3800
Variable per unit rate) 2
Spending Variance
Fixed FOH = 4,000 hours x 3

= 12,000

a) Budget allowance based in Actual hours
b) Overhead charged to production

Actual hours x 3800
Total Standard Factory overhead rate 5
Idle Capacity Variance
3 Efficiency Variance (TOTAL)

Actual hours worked x 3800

Standard hours allowed x 4000
Efficiency Variance
FOH EFFICIENCY VARIANCE:
Overhead charged to production - Based on Actual hours:

Actual hours allowed x 3800
Overhead charged to production - Based on Std. Hours on Expected output:

Std. hours allowed on expected output x 3850
FOH YEILD VARIANCE:

Std. hours allowed on expected output x 3850
Overhead charged to production - Based on Std. Hours on Actual output:

Std. hours allowed on Actual output x 4000
FOH YEILD VARIANCE:
used for Material A xxx
used for Material B xxxx
used for Material C xxx

AL PRICE VARIANCE xxxx
Standard price Material Mix

Variance
0.25 750 unfav
0.40 200 fav
0.10 250 fav

MATERIAL MIX VARIAN 300 unfav
ss is more 0.1667
ss is less than 0.1667

d actual output) x std average material rate
Standard price Material yeild

variance
0.25 1,500 Fav
0.40 600 Fav
0.10 150 Fav

MATERIAL yeild VARIAN 2,250 Fav
Material Qty
Variance
750
800
400
1,950
3,850
3800
50 Fav
6
300 Fav
6
6.08
0.08 U
3800
304 U
3,850
4,000
150
6
900 Fav
hour cons.) x Std. Rate
12,000
10,000 22,000
12,000
7,600 19,600
2,400 UNFAV.
19,600
19,000
acity Variance 600 UnFav.
19,000
20,000
1,000 Fav
19,000
Expected output:
19,250
FICIENCY VARIANCE: 250 Fav
Expected output:
19,250
Actual output:
20,000
ILD VARIANCE: 750 Fav
Sol of Ex - 1
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 UF
Standard Rate 0.80
Material quantity variance 720 UF

Formula: Difference between Standard and Actual rate x Actual quantity purchas
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

ity x Standard Rate
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
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

antity purchased
antity ISSUE
Solution of Ex -3

Difference between Standard and Actual hours x Standard Rate

(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

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

ndard Rate
l hours used
Solution of Ex -4

2 - Variance method
a) Actual amount of factory overhead Rs. 11,000
Fixed FOH 4,500
Variable FOH 6,500
b) Budget allowance based in standard hours allowed

Fixed budgeted overhead 4,500
Variable per unit rate) 1.50 6,750
CONTROLLABLE VARIANCE
2 Volume Variance
a) Budget allowance based in standard hours allowed
b) Standard Overhead charged to production

Total Standard Factory overhead rate 2.40
VOLUME VARIANCE
3 - Variance method
1 Spending Variance
Fixed FOH 4,500
Variable FOH 6,500
b) Budget allowance based in actual hours worked

(Actual hours worked x 4,400
Spending Variance

a) Budget allowance based in Actual hours allowed
b) Overhead charged to production (Based on Actual hours)

Actual hours allowed x
Total Standard Factory overhead rate

Efficiency Variance
4 - Variance method
1 Spending Variance
Fixed FOH
Variable FOH

Spending Variance
Budget allowance based on actual hours
Budget allowance based on Standard hours allowed
Variable Efficiency Variance:
Proof OR
Difference 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.
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 OR
Difference between actual hours and Standard hours x Fixed FOH rate
Rs. 90 Fav.
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)
Proof OR
Difference between actual hours and Normal capacity hours x Fixed FOH rate
(600 hours Unfav x 0.90)
Rs. 540 Unfav.
Example
2 - Variance method
Fixed FOH 4,500
Variable FOH 6,500

2 Volume Variance
b) Standard Factory overhead

Fixed FOH (4,500 x 0.90) 4,050
Variable FOH (4,500 x 1.50) 6,750
VOLUME VARIANCE
1 Spending Variance
a) Actual factory overhead
Fixed FOH 4,500
Variable FOH 6,500 11,000
b) Budgeted FOH
Spending Variance 100

a) Budgeted FOH
b)Standard FOH
Fixed FOH (4,400 hours x 0.90) 3,960
Variable FOH (4,400 hours x 1.50) 6,600 10,560
Idle Capacity Variance 540

Efficiency Variance 240
4 - Variance method
1 Spending Variance
Fixed FOH
Variable FOH 11,000

Spending Variance 400
Proof OR
(100 hours UF x 1.50)
Rs. 150 UF
Actual hours x Fixed FOH rate (4,400 hours x 0.90) 4,140
Standard hours allowed x Fixed FOH rate (4,500 hours x 0.90) 4,050
Fixed Efficiency Variance: (90)
Proof OR
Rs. 90 Fav.

Normal Capacity hours x Fixed FOH r (5,000 hours x 0.90) 4,500
Actual hours worked x Fixed FOH rate (4,400 hours x 0.90) 3,960
Idle Capacity Variance 540
Proof OR
Difference between actual hours and Normal capacity hours x Fixed FOH rate
(600 hours Unfav x 0.90)
Rs. 540 Unfav.
Example
11,000
11,250
(250) F
11,250
10,800
(450) U
11,000
11,100
(100) F
11,100
10,560
(540) U
10,560
10,800
(240) F
11,000
11,100
100 Fav
11,100
11,250
150 Fav
e FOH rate
3,960
4,050
90 Fav
4,500
3,960
540 Unfav
Fixed FOH rate
11,000
11,250
250 F
11,250
10,800
450 UF
Fav
UF
Fav
UF
UF
Unfav
FormulaDifference between Standard and Actual Quantity x Standard Rate

(per unit consumption x actual units)
(2 kgs x 7000 units) 14,000
Actual quantity used in production 14,400
Difference 400 U
Standard Rate 0.50
Material quantity variance 200 U
FormulaDifference between Standard and Actual rate x Actual quantity purchased or issu

Difference 0.01 U
Actual Quantity used 14,400
Material price variance 144 U
FormulaDifference between Standard and Actual hours x Standard Rate

(per unit hour consumption x actual units)
(10,000 hours / 8,000 units = 1.25 x 7000) 8,750
Difference 250 U
Standard Rate 9
Labour hour/ efficency Variance 2,250 U
FormulaDifference between Standard and Actual rate x Actual hours used

Actual rate paid to labour
(76,500 / 9,000 hours) 8.50
Difference 0.50 F
Labour Price Variance 4,500 F

2 - Variance method
Fixed FOH 5,000
Variable FOH 12,550

(Standard hours allowed x
Variable per unit rate)
(1.25 hours x 7000 units = 8750 hours x 1.50) 13,125
2 Volume Variance

Standard hours allowed x
(1.25 hours x 7000 units x 2)
VOLUME VARIANCE
OR (Difference b/w Std time and Normal Capacity) x Fixed cost rate
(1,250 hours x 0.50)
= Rs. 625
3 - Variance method
1 Spending Variance
Fixed FOH 5,000
Variable FOH 12,550

(Actual hours x
(9,000 hours x 1.50) 13,500
Spending Variance


Actual hours x
(9,000 hours x 2)

OR (Difference b/w Actual time and Normal Capacity) x Fixed cost rate
(1,000 hours x 0.50)
= Rs.500
Actual hours worked x
(9,000 hours x 2)

Standard hours allowed x
(1.25 hours x 7000 units = 8,750 hours x 2)
Efficiency Variance
4 - Variance method
1 Spending Variance
Fixed FOH 5,000
Variable FOH 12,550

(Actual hours x
(9,000 hours x 1.50) 13,500
Spending Variance


Actual hours x
(9,000 hours x 2)

OR (Difference b/w Actual time and Normal Capacity) x Fixed cost rate
(1,000 hours x 0.50)
= Rs.500

Actual hours x Variable FOH rate

Standard hours allowed x Variable FOH rate
Variable Efficiency Variance:

Actual hours x Fixed FOH rate

Standard hours allowed x Fixed FOH rate
Fixed Efficiency Variance:

ndard Rate
quantity purchased or issued

hours used
17,550
18,125
575 F
18,125
17,500
(625) U
cost rate
17,550
18,500
950 F
18,500
18,000
-
500 U
ed cost rate
18,000
17,500
500 U
17,550
18,500
950
18,000
-
###
ed cost rate
-
-
-
Quantity Schedule:
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

(7,850 units x 24 kgs per unit) 188,400
Difference 4,010 UF
Standard Rate 3
Material quantity variance 12,030 UF
Formula: Difference between Standard and Actual rate x Actual quantity used
Standard rate for purchases 3

Difference 0.04 UF
Actual Quantity 192,410
Material price variance 7,696.40 UF

Formula: Difference between Standard and Actual hours x Standard Rate

(7,840 units x 6 hours per unit consumption) 47,040
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 UF
Labour Price Variance 4,683 UF

2 - Variance method
Fixed FOH 11,250
Variable FOH 25,090

Note: Standard hours allowed = 7,840 units x 6 =47,040 hours

Standard variable rate = Rs. 22,500 / 45,000 hours = 0.50
2 Volume Variance

VOLUME VARIANCE
Note: Total FOH rate = Rs. 33,750 / 45,000 hours = 0.75
3 VARIANCE:
1 Spending Variance
Fixed FOH 11,250
Variable FOH 25,090
b) Budget allowance based in actual hours worked

Spending Variance

a) Budget allowance based in Actual hours allowed
b) Overhead charged to production (Based on Actual hours)

Actual hours allowed x

Efficiency Variance
4 - Variance method
Proof
(47,040 hours std. - 46,830 hours actual) x 0.50
(210 hours F x 0.50)
105 Fav
Proof OR
(47,040 hours std. - 46,830 hours actual) x 0.25
(210 hours F x 0.25)
52.5 Fav
Controllable variance = Spending variance + Variable portion of efficiency variance

=1,675 UF + 105 F
= 1570 UF
Volume variance = Idle capacity + Fixed portion of efficiency variance.

= 457.5 F + 52.5 F
= 510 F
erial, 50% conversion)
erial, 50% conversion)

antity used
36,340
34,770
1,570 U
hours = 0.50
34,770
35,280
510 F
36,340
34,665
1,675 UF
34,665
35,123
458 FAV
35,123
35,280
(158) Fav
Expected Yeild or Input ratio = Output / Input x 100
Material A (Difference b/w std and actual rate) x actual qty purchase or used for Material A
Material B (Difference b/w std and actual rate) x actual qty purchase or used for Material B
Material C (Difference b/w std and actual rate) x actual qty purchase or used for Material C
Material Actual Standard Actual Qty Variance Standard

Quantity use Mix % at Std. mix Price
Material A 1,500 33.33 1,600 100 Fav 0.10
Material B 3,300 66.67 3,200 100 Unfav 0.40
4,800 100 4,800 MATERIAL MIX VA
Expected Yeild = 8000 2.6666666667

3000
or
Output = Input x Expected yeild
3000 x 2.667
Output = 8001
or
Input = Output / Expected yeild 10,000 / 2.667
8000/2.667 3750 Input
Input = 3000 4800 Actual Input
1,050 x 0.30
315
Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard pri
Material Actual Qty Standard Std. Qty at Variance Standard

at Std. mix Mix % Std. Mix Price
A 1,600 33.33 1,250 (350) Unfav 0.10
B 3,200 66.67 2,500 (700) Unfav 0.40
4,800 100 3,750 MATERIAL yeild V
Std. Qty allowed = Actual production / Expected yeild

10,000 / 2.667
Std. Qty allowed 3750
xxx
xxxx
xxx
xxxx
) x Standard price
Material Mix
Variance
10.00 Fav
40.00 Unfav
30.00 unfav
ut) x std average material rate
ix) x Standard price
Material yeild
variance
(35) Unfav
(280) Unfav
(315) Unfav
Actual consumption Standard consumption for 12,500 FG:
Kgs Rate
A 8,750 0.056 A 1,500 0.0600
B 3,750 0.380 B 625 0.4000
C 6,250 0.280 C 1,000 0.2500
18,750 0.716 3,125 0.710
Input rate =
Output rate =
Expected Yeild = 12,500 4 tubes per kg

3,125
or
3125 x 4
Output = 12,500
or
12500 / 4
Input = 3,125
For actual output (77,500 tubes), Standard input as per expected yeild
Input = 77,500 / 4
Input = 19,375 Standard input allowed for actual production
Actual input = 18,750

Variance 625 Fav
Material Yeild variance = 625 fav input x input rate 0.1888

Material Yeild variance = 118 Fav
METHOD NO.2:
Material Yeild variance = (Diff. B/w Expected output as per expected yeild and actual output) x std
material rate (O
Expected output as per expected yeild:

Output = 18,750 kgs x 4 tubes per kg
Output = 75,000
Expected output as per expected yeild

Actual output
Difference
Std. material output average rate
MATERIAL YEILD VARAINCE


Qty used Mix % at Std. mix
Material A 8,750 48 9,000 250 Fav
Material B 3,750 20 3,750 -
Material C 6,250 32 6,000 250 Unfav

18,750 100 18,750 MATERIAL MIX VARIANCE

A 9,000 48 9,300 300 Fav
B 3,750 20 3,875 125 Fav
C 6,000 32 6,200 200 Fav

18,750 100 19,375 MATERIAL yeild VARIANCE
Std. Qty allowed = Actual production / Expected yeild

77,500 / 4
Std. Qty allowed 19,375
Std. mixing ratio
90 0.48
250 0.20
250 0.32
590 1
0.1888 per kg
0.0472 per tube
and actual output) x std

material rate (Output rate)
75,000
77,500
2,500 Fav
0.05
118 Fav
mix) x Standard price
Standard Material Mix

Price Variance
0.060 15 Fav
0.400 -
0.250 63 unfav
MIX VARIANCE 48 unfav
ctual output) x std average material rate
d mix) x Standard price
Standard Material yeild

Price variance
0.06 18 Fav
0.40 50 Fav
0.25 50 Fav
yeild VARIANCE 118 Fav
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

ual hours worked
12,000
500
12,500
FORMULA:
Material A (Difference b/w std and actual rate) x actual qty purchase or used for M
Material B (Difference b/w std and actual rate) x actual qty purchase or used for M
Material C (Difference b/w std and actual rate) x actual qty purchase or used for M
e0
Recognized at the time of purchases:
Material Standard Actual Variance Actual

Rate Rate Qty Purchase
Gum base 0.25 0.24 0.01 Fav 162,000

Corn syrup 0.40 0.42 0.02 Unfav 30,000
Sugar 0.10 0.11 0.01 Unfav 32,000
MPV
Recognized at the time of used
Material Standard Actual Variance Actual

Rate Rate Qty Used
Gum base 0.25 0.24 0.01 Fav 157,000

Corn syrup 0.40 0.42 0.02 Unfav 38,000
Sugar 0.10 0.11 0.01 Unfav 36,000
MPV
Formula (Difference b/w actual qty used at actual mix and actual qty at std mix) x Std. Rate
Step # 1:
Actual quantity used - in the production for 200,000 lbs of chewing gum (F.G) during Jan
Material Opening Purchases Closing

Stock Stock
Gum base 10,000 162,000 15,000

Corn syrup 12,000 30,000 4,000
Sugar 15,000 32,000 11,000
Actual quantity used - in the production of 200,000 lbs of chewing gum
Step # 2:
Material Actual Qty Standard Actual Qty Variance

at actual mix Mix % at Std. mix
Gum Base 157,000 0.6667 154,000 3,000 unfav

Corn Syrup 38,000 0.1667 38,500 500 fav
Sugar 36,000 0.1667 38,500 2,500 fav
231,000 1.0000 231,000 MATERIAL MIX VARIANCE
Working: Standard Ratio:
Material Standard Standard

Consumption Ratio
Gum Base 800 0.6667

Corn syrup 200 0.1667
Sugar 200 0.1667
1,200
Expected Yeil 1,000 = 0.8333 Therefore;

1,200 Normal loss = 1 - Expected yeild
or Normal loss = 1 - 0.8333
Output = Input x Expected yeild Normal loss = ###
1200 x 0.8333
Abnormal loss - when loss is more 0.1667
Output = 1000 lbs
Abnormal gain - when loss is less than 0.1667
or
1000 / 0.8333
Input = 1200 lbs
METHOD NO.1:

Gum Base 154,000 0.6667 160,000 6,000 Fav
Corn Syrup 38,500 0.1667 40,000 1,500 Fav
Sugar 38,500 0.1667 40,000 1,500 Fav
231,000 1.0000 240,000 MATERIAL YEILD VARIANCE
Input = Actual production (Output) / Expected yeild

=200,000 lbs / 0.83333
Std. QTY 240,000
allowed
METHOD NO.2 (As per output rate):
Material Yeild variance = (Diff. B/w Expected output as per expected yeild and actual output) x std
material rate (O
Expected output as per expected yeild:
Output = 231,000 x 0.83333
Output = 192,500
Expected output as per expected yeild

Actual output
Difference
Std. material output average rate
MATERIAL YEILD VARAINCE
METHOD #3: (AS per INPUT rate)

For actual output (200,000 lbs), Standard input as per expected yeild
Input = 200,000 / 0.8333
Input = 240,000 Standard input allowed for actual production
Actual input = 231,000

Variance 9,000 Fav
Material Yeild variance = 9,000 fav input x input rate 0.25

Material Yeild variance = 2,250 Fav
Summary:
Input Expected Output
Yeild
Actual 231,000 0.8333 192,500
Standard 240,000 0.8333 200,000

Difference 9,000 Fav 7,500 Fav
Rate 0.25 0.30
MYV 2,250 Fav 2,250 Fav
METHOD NO.4:
Material yeild variance = Difference between (Actual input x input material rate) and (Actual output x outp
Actual input at std. input rate:

(231,000 units x 0.25) 57,750
Actual output at std. output rate:

(200,000 units x 0.30) 60,000
MATERIAL YEILD VARAINCE 2,250 Fav
Material mix variance 300 U

Material yeild variance 2,250 Fav
MQV 1,950 Fav
OR

Gum Base 157,000 160,000 3,000 Fav 0.25
Corn Syrup 38,000 40,000 2,000 Fav 0.40
Sugar 36,000 40,000 4,000 Fav 0.10

231,000 240,000 MQV
Labor Efficience Variance(2) = Diff b/w std. hours allowed for expected output and actual hours used x St
Actual input = 231,000 lbs and Actual Output 200,000lbs
Actual input = 231,000 lbs and Expected output as per Expected yeild 192,500 lbs

(192,500 units x 0.02 hours)
Actual hours used

Difference
Std. Rate
Labor Efficiency Variance
Working:
Std. hour used for one unit of output:
Std. hour used / output

20 hours / 1000 units
0.02 std. hours allowed for one unit.

Standard rate
Actual rate (23,104 / 3,800 hours)
Difference
Actual hours
Labor Rate Variance

Expected output 192,500
Actual output 200,000 Units
Yeild 7,500
Std. hours allowed for one unit 0.02
Hours
Total hours saved 150
Std. rate per hour 6
Labor yeild variance 900 Fav
LYV (Difference b/w Expected output and actual output x per unit hour cons.) x Std. Rate
xxx
xxxx
xxx
xxxx
MPV
y Purchase
1,620 Fav
600 Unfav
320 Unfav
700 Fav
MPV
1,570 Fav
760 Unfav
360 Unfav
450 Fav
at std mix) x Std. Rate
um (F.G) during Jan
Actual material
Used
157,000
38,000
36,000
231,000 Actual
Input
Std. Material Mix

Rate Variance
0.25 750 unfav

0.40 200 fav
0.10 250 fav
L MIX VARIANCE 300 unfav
s more 0.1667
s less than 0.1667
ndard price
Std. MYV
Price
0.25 1,500 Fav
0.40 600 Fav
0.10 150 Fav
L YEILD VARIANCE 2,250 Fav
and actual output) x std
material rate (Output rate)
192,500
200,000
7,500 Fav
0.30
2,250 Fav
actual production
rate) and (Actual output x output rate)
Material Qty
Variance
750
800
400
1,950
tput and actual hours used x Std rate
3,850
3,800
50 Fav
6
300 Fav
6.00
6.08
0.08 U
3,800
304 U
unit hour cons.) x Std. Rate
Aplha Beeta
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.
[(Actual qty x actual rate) + (actual qty x actual 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
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (B
[(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
Cost Volume variance:

(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std
[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x
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 Std. rate)
al rate)] - [(Actual qty x std rate) + (actual qty x std rate)]
(2,000 x 25)]
udgeted quantity x actual mix x std rate)
te)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]
+ (3,500 x 25)]
x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
udgeted quantity x actual mix x std rate)
std. COGSrate)] - [(Budgeted Qty x std COGS rate) + (Budgeted qty x std COGS rate)]
125,000
(100,000)
25,000
gross profit
(28,235.20)
(3,235.20) Unfav.
Pg 614, Illustration 1 of Standard costing:
Sales price Variance
Product Base yr Current yr Variance Current

Rate Rate Qty sold
X 5.00 6.60 1.60 Fav 10,000

Y 4.00 3.50 0.50 Unfav 4,000
Z 2.60 3.00 0.40 Fav 20,000
Sales price variance
Sales volume variance:
Product Base yr Current yr Variance Base yr

Qty Qty rate
X 8,000 10,000 2,000 Fav 5.00

Y 7,000 4,000 3,000 Unfav 4.00
Z 20,000 20,000 - 2.60
Sales Volume variance
Cost price Variance
Product Base yr Current yr Variance Current

Rate Rate Qty sold
X 4.000 4.000 - 10,000

Y 3.500 3.500 - 4,000
Z 2.175 2.800 0.625 Unfav 20,000
Cost price variance
Cost volume variance:
Product Base yr Current yr Variance Base yr

Qty Qty rate
X 8,000 10,000 2,000 Unfav 4.000

Y 7,000 4,000 3,000 Fav 3.500
Z 20,000 20,000 - 2.175
Cost Volume variance
Sales Mix Variance
Product Current Qty Base yr Base yr Sales Current yr Qty Variance

Sold Qty Mixing ratio at base yr mix ratio
X 10,000 8,000 0.2286 7,771 2,229

Y 4,000 7,000 0.2000 6,800 2,800
Z 20,000 20,000 0.5714 19,429 571
34,000 35,000 1
Final Sales volume variance:
a) Calculate the amount of average gross profit (Base year)
Average G.P = Total amount of G.P (Base yr)

Total units sold in Base year
20,000
35,000
Average G.P = 0.5714
b) Calculate the difference in two years sales volume:
Base year sales (in units) 35,000

Current year sales (in units) 34,000
Difference in volume 1,000 Unfav
x Average Gross profit 0.5714
FINAL SALES VOLUME VARIANCE 571

SPV
16,000 Fav
2,000 Unfav
8,000 Fav
22,000 Fav
SVV
10,000 Fav
12,000 Unfav
-
2,000 Unfav
CPV
-
-
12,500 Unfav
12,500 Unfav
CVV
8,000 Unfav
10,500 Fav
-
2,500 Fav
Base yr SMV
G.P
Fav 1.000 2,229 Fav

Unfav 0.500 1,400 Unfav
Fav 0.425 243 Fav
1,071 Fav
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
[(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 s
[(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)
[(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)
[(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
(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
(120 m + 40 m) x 0.347 (55.52)
6.98
mix x Std. rate)
rate) + (actual qty x std rate)]
mix x std rate)
rate) + (Budgeted qty x std rate)]
tual qty x std COGSrate) + (actual qty x std COGSrate)]

mix x std rate)
ed 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 9,600 3,600

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
34,800 12,480
Note: Total material purchase price variance = 12,000

Less: MPV charged to R/M (at end)
(12,000 / 200,000 x 40,000) (2,400) MPV on R/ m (at end)
MPV-Recognized at the time of purchases

(12,000 / 200,000 x 160,000) 9,600 MPV on used material
W-1 Material Price variance allocation
Material Allocation MPV

Inventory Percentage
WIP 60,000 37.50 3,600
FG 20,000 12.50 1,200
COGS 80,000 50.00 4,800
160,000 100.00 9,600
W-2 Labour Efficiency variance allocation
Labour Allocation Variance

Cost Percentage
WIP 20,000 20.00 1,200
FG 20,000 20.00 1,200
COGS 60,000 60.00 3,600
100,000 100.00 6,000
W-3 FOH Controllable & Volume variance allocation
FOH Allocation Controllable

Cost Percentage Variance
WIP 80,000 40.00 2,880
FG 20,000 10.00 720
COGS 100,000 50.00 3,600
200,000 100.00 7,200
Required no.2: COMPARATIVE COGS
Standard Variance Actual
Material purchased 200,000 12,000 212,000

Less: Ending R/Material (40,000) (2,400) (42,400)
Raw material used 160,000 9,600 169,600
Direct labor 100,000 6,000 106,000
Prime Cost 260,000 15,600 275,600

Factory overhead 200,000 19,200 219,200
Manufacturing cost 460,000 34,800 494,800

Less: WIP (at end) (160,000) (12,480) (172,480)
Cost of Goods manufactured 300,000 22,320 322,320

Less: Finished goods (at end) (60,000) (4,320) (64,320)
Cost of Goods Sold 240,000 18,000 258,000
Required no. 3: Income Statement (Actual Basis)
Sales 520,000
Less: Cost of goods sold (258,000)
Gross Profit (actual) 262,000
Less: Operating Expenses:

Administrative Expenses 120,000
Marketing Expenses 60,000 (180,000)
NET INCOME (Actual) 82,000
Required no. 4: Reconcilation of Standard and Actual Income:

NET INCOME (Actual) 82,000
Add: Variance allocated to COGS 18,000
Net Income (standard) 100,000

FG COGS
1,200 4,800
1,200 3,600
720 3,600
1,200 6,000
4,320 18,000
V on R/ m (at end)
V on used material
Volume
Variance
4,800
1,200
6,000
12,000
Requried no.1: Material Price, Mix and Yeild variance:
Material Price variance:
Material Actual Price Standard Price Variance Actual QTY

Purchases
A 2,200 2,150 50 Unfav. 2,000
B 1,850 1,750 100 Unfav. 1,200
C 1,200 1,250 50 Fav 500

Material Price variance
Formula (Difference b/w actual qty used and actual qty at std mix) x Standard p
MateActual Standard Actual Qty Variance

Qty. used Mix % at Std. mix
A 1,870 50 1,705 165 unfav
B 1,100 40 1,364 264 fav
C 440 10 341 99 unfav


Formula (Difference b/w actual qty at std mix and std qty at std mix) x Standard
Mat Actual Qty Standard Std. Qty at Variance

A 1,705 50 1,778.70 73.70 Fav
B 1,364 40 1,422.96 58.96 Fav
C 341 10 355.74 14.74 Fav

3,410 100 3,557.40 MATERIAL yeild VARIANCE
Expected Yeild = 100 0.90909090909

110
or
3,557.4 x 0.9090909
Output = 3,234 tons
or
3,234 tons / 0.9090909
Input = 3,557.40

1 Std. Hours allowed for Expected Output
(500 / 100 tons = 5 hours per ton x 3,100 expe 15,500
2 Actual hours used 15,800
300
Standard rat 37.50
11,250
Working: Expected output:
Expected output = Actual Input x Expected yeild
3,410 tons x 0.909090
3100
Standard rate 37.50
Actual rate 39.75
2.25
Actual hours 15,800
35,550
(500 / 100 tons = 5 hours per ton x 3,100 expe 15,500

(500 / 100 tons = 5 hours per ton x 3,234 actu 16,170
670
Standard rat 37.50
25,125
FACTORY OVERHEAD VARIANCE:
3 - Variance method
1 Spending Variance
Fixed FOH 553,750
Variable FOH 424,500

Variable per unit rate) 25 395,000
Variable rate = Rs. 412,500 / 16,500 hours

25


Total FOH rate = (Fixed cost + Variable cost) / 16,500 hour

62.5
3 Efficiency Variance (TOTAL)
Actual hours worked x 15,800

Standard hours allowed on actual output x 16,170
3,234 tons x 5 hours per ton

=16,170 hours
Overhead charged to production - Based on Actual hours:


Std. hours allowed on expected output x 15,500
FOH YEILD VARIANCE:

Std. hours allowed on expected output x 15,500
Overhead charged to production - Based on Std. Hours on Actual output:

Std. hours allowed on Actual output x 16,170
Std. Hours allowed on actual output

= Actual output x std. Hour consumption
= 3,234 x 5 hours
16,170 hours
1 Spending Variance
Fixed FOH 553,750

Variable per unit rate) x Rs 25 395,000
Spending Variance
Standard Variable rate = 412


Total Standard Factory overhead rate x Rs 62.50
Idle Capacity Varianc
Standard Total FOH rate = (618,750 + 412,500) / 16,500 hours = Rs. 62.

Standard hours allowed for actual input x 17,050
Efficiency Variance
Working: Standard hours allowed for actual input:

Actual input 3410 tons
Per ton hour
consumption 5
17050 hours
4 Factory overhead Yeild variance
Std. hours allowed for actual input

(Std. hours for actual input x Total std. FOH rate)
(17,050 x Rs. 62.5)
Std. hours allowed for actual Output

(std. hours for actual Output x Total std. FOH rate)
(3,234 tons x 5 hours = 16,170 hours x 62.5)
Material Price
Variance
100,000 Unfav.
120,000 Unfav.
25,000 Fav
195,000 Unfav.
ty at std mix) x Standard price

Price Variance
2,150 354,750 unfav
1,750 462,000 fav
1,250 123,750 unfav

AL MIX VARIANCE 16,500 unfav
qty at std mix) x Standard price
Standard Material yeild

Price variance
2,150 158,455 Fav
1,750 103,180 Fav
1,250 18,425 Fav

L yeild VARIANCE 280,060 Fav
Unfav
Unfav
U
Fav
978,250
1,013,750
35,500 Fav
1,013,750
987,500
26,250 UnFav.
987,500
1,010,625
23,125 Fav
987,500
n Expected output:
968,750
18,750 Unfav
n Expected output:
968,750
n Actual output:
1,010,625
41,875 Fav
consumption
978,250
1,013,750
35,500 Fav
1,013,750
987,500
26,250 Unfav
,500) / 16,500 hours = Rs. 62.50
987,500
1,065,625 -
78,125 Fav.
1,065,625
1,010,625
55,000 Unfav
1 Company is cement producing company.
2 2major component mixing - A (Lime) and B (Clay) + Water + 3rd component C(insignificant)
3 Data is for 100 output:
Material Tns Cost % of output Amount

A 55 2,150 50 118,250
B 44 1,750 40 77,000
C 11 1,250 10 13,750
INPUT 110 5,150 100 209,000
OUTPUT 100
5 To convert 110 tons into 100 tons, 500 labor hours at Rs. 37.50 per ton. FOH is applied on D/L
6 In producing 3,234 tons, the following cost were incurred:
Direct labor 15,800 hours at Rs. 39.75

Fixed FOH 553,750
VariableFOH 424,500
7 Material Purchases Consumed

Qty Price
A 2,000 2,200 1,870
B 1,200 1,850 1,100
C 500 1,200 440
8 No WIP at start and material price variance is recorded at the time of purchases.
Requried no.1: Material Price, Mix and Yeild variance:

Material Price variance:
Material Price Variance Actual QTY

Actual Std. Purchases
A 2,200 2,150 50 Unfav. 2,000
B 1,850 1,750 100 Unfav. 1,200
C 1,200 1,250 50 Fav 500


Qty. used Mix % at Std. mix
A 1,870 50 1,705 165 unfav
B 1,100 40 1,364 264 fav
C 440 10 341 99 unfav


A 1,705 50 1,779 74 Fav
B 1,364 40 1,423 59 Fav
C 341 10 356 15 Fav

3,410 100 3,557 MATERIAL yeild VARIANCE
Expected Yeild = 100 0.9090909091

110
or
3,557.4 x 0.9090909
Output = 3,234 tons

or
3,234 tons / 0.9090909
Input = 3,557.40
Material mix variance 16,500 U

Material yeild variance 280,060 Fav
MQV 263,560 Fav
OR

A 1,870 1,779 91 Unfav 2,150.00
B 1,100 1,423 323 Fav 1,750.00
C 440 356 84 Unfav 1,250.00

3,410 240,000 MQV

1 Std. Hours allowed for Expected Output
(500 / 100 tons = 5 hours per ton x 3, 15,500
2 Actual hours used 15,800
300
Standard r 37.50
11,250
Working: Expected output:
Expected output = Actual Input x Expected yeild
3,410 tons x 0.909090
3100
Standard rate 37.50
Actual rate 39.75
2.25
Actual hou 15,800
35,550
(500 / 100 tons = 5 hours per ton x 3, 15,500

(500 / 100 tons = 5 hours per ton x 3,2 16,170
670
Standard r 37.50
25,125
1 Spending Variance
Fixed FOH 553,750

Variable per unit rate) x Rs 25 395,000
Spending Variance
Standard Variable rate = 412


Standard Total FOH rate = (618,750 + 412,500) / 16,500 hours = Rs.

Standard hours allowed for actual input x 17,050
Efficiency Variance
Working: Standard hours allowed for actual input:

Actual input 3410 tons
Per ton hour
consumption 5
17050 hours
4 Factory overhead Yeild variance
Std. hours allowed for actual input

(Std. hours for actual input x Total std. FOH rate)
(17,050 x Rs. 62.5)
Std. hours allowed for actual Output

(std. hours for actual Output x Total std. FOH rate)
(3,234 tons x 5 hours = 16,170 hours x 62.5)
C(insignificant)
H is applied on D/L
MPV
100,000 Unfav.
120,000 Unfav.
25,000 Fav
195,000 Unfav.
andard price
Standard MMV
Price
2,150 354,750 unfav
1,750 462,000 fav
1,250 123,750 unfav

L MIX VARIANCE 16,500 unfav
Standard price
Standard MYV
Price
2,150 158,455 Fav
1,750 103,180 Fav
1,250 18,425 Fav

L yeild VARIANCE 280,060 Fav
MQV
196,295 Unfav
565,180 Fav
105,325 Unfav
263,560 Fav
Unfav
Unfav
Fav
978,250
1,013,750
35,500 Fav
1,013,750
987,500
26,250 Unfav
00) / 16,500 hours = Rs. 62.50
987,500
1,065,625 -
78,125 Fav.
1,065,625
1,010,625
55,000 Unfav
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 materia
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
Required no 4: Direct Material Mix 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 VARIAN
Amount
743,600
572,000
371,800
1,687,400
Actual Cost of material
Material Price
Variance
81,900 Unfav.
112,125 Fav
13,650 Unfav.
16,575 Fav
x) x Standard price

Rate Variance
6.50 33,800 Fav
4.00 26,000 Unfav
13.00 16,900 Fav

ATERIAL 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

(110,000 units x 2 lbs per unit) 220,000
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

(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

Labour Price Variance 25,760 UnFav

2 - Variance method
W-8 1 Controllable Variance

Fixed FOH
Variable FOH

Fixed budgeted overhead
Variable per unit rate) 1.50
W-9 2 Volume Variance


VOLUME VARIANCE
2,950,000
(2,100,310)
849,690
(651,000)
198,690
Unfav
per lbs
Unfav
13,760 / 8.16)
nce
114,000
181,500 295,500
114,000
165,000 279,000
16,500 Unfav
279,000
286,000
7,000 Fav

Standard Costing

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Material Quantity Variance

1 Standard quantity allowed for production

2 Actual quantity used in production

Material quantity variance -

Material Price Variance

Standard rate for purchases

Actual rate on purchases

Material price variance -

Labour hour/ efficency Variance

Standard hours allowed for production

Actual hours used in production

Labour hour/ efficency Variance -

Labour Wage Variance

Standard rate for payment of labour

Actual rate paid to labour

Labour Price Variance

II) Variable FOH 19,250 39,250

b) Budgeted Factory overhead

II) Variable budgeted OH

CONTROLLABLE VARIANCE UF 2,750

b) Standand Factory Overhead

II) Variable budgeted OH

b) Standand Factory Overhead

II) Variable budgeted OH 4,500

VolumeVariance = 500 hours x 0.90 = 450 UF

b) Budget FOH allowance based in actual hours

2 Idle Capacity Variance

b) Standard Overhead charged to production

b) Overhead charged to production (Based on Standard hours)

b) Budget allowance based on actual hours

2 Variable Efficiency Variance:

Budget allowance based on actual hours -

Budget allowance based on Standard hours allowed -

Variable Efficiency Variance: -

3 Fixed Efficiency Variance:

Actual hours x Fixed FOH rate -

Standard hours allowed x Fixed FOH rate -

Fixed Efficiency Variance: -

4 Idle Capacity Variance

Normal Capacity hours x Fixed FOH rate -

Actual hours worked x Fixed FOH rate -

Idle Capacity Variance -

Material Price Variance - at different materials:

Material Mix Variance

Material Actual Standard Actual Qty Variance

Gum Base 157,000 66.67 154,000 3,000 unfav

Corn Syrup 38,000 16.67 38,500 500 fav

Sugar 36,000 16.67 38,500 2,500 fav

Expected Yeild = Output / Input

Expected Yeild = 1000 = 0.8333 Therefore;

Material Yeild Variance

Material Actual Qty Standard Std. Qty at Variance

Corn Syrup 38,500 16.67 40,000 1,500 Fav

Sugar 38,500 16.67 40,000 1,500 Fav

Actual production / Expected yeild

Material Quantity Variance:

Material mix variance 300 U

Material Actual QTY Std. Qty Variance Std.

Gum Base 157,000 160,000 3,000 Fav 0.25

Sugar 36,000 40,000 4,000 Fav 0.10

Labour Efficiency Variance

Actual hours used

Standard hours allowed for Actual output

FACTORY OVERHEAD VARIANCE: